Heterogeneous Gain Learning and Long Swings in Asset Prices
AbstractThis paper considers the impact of heterogeneous gain learning in an asset pricing model. A relatively stylized model is shown to generate persistent swings of asset prices from their fundamental values which replicates long range samples of U.S financial data. The detailed mechanisms of the learning models are then explored. Evidence suggests that agents' perceptions of risk and its dynamics and persistence are important in generating appropriate price/fundamental dynamics. Agents putting large amounts of weight on the recent past in their volatility models control a large fraction of wealth, and are important in perpetuating the volatility magnifying dynamics of the market.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Brandeis University, Department of Economics and International Businesss School in its series Working Papers with number 10.
Length: 47 pages
Date of creation: Nov 2010
Date of revision:
Learning; Asset Pricing; Financial Time Series; Evolution; Memory;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-12-11 (All new papers)
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Meredith Robitaille).
If references are entirely missing, you can add them using this form.