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Abstract

I construct a behavioral model of asset pricing in which agents choose whether to base their expectations on chartist or fundamental forecasts. I simulate the model in order to test its efficacy in explaining the moments and time series properties of the FTSE All-Share index, and find that the model cannot be rejected as the data generating process.

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Bibliographic Info

Paper provided by Cardiff University, Cardiff Business School, Economics Section in its series Cardiff Economics Working Papers with number E2009/17.

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Length: 10 pages
Date of creation: Sep 2009
Date of revision:
Handle: RePEc:cdf:wpaper:2009/17

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Web page: http://business.cardiff.ac.uk/research/academic-sections/economics/working-papers
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Related research

Keywords: Behavioral finance; Asset pricing;

Other versions of this item:

Find related papers by JEL classification:

• G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
• D03 - Microeconomics - - General - - - Behavioral Economics; Underlying Principles

This paper has been announced in the following NEP Reports:

• NEP-ALL-2009-10-03 (All new papers)
• NEP-CBA-2009-10-03 (Central Banking)
• NEP-CBE-2009-10-03 (Cognitive & Behavioural Economics)
• NEP-CFN-2009-10-03 (Corporate Finance)
• NEP-FOR-2009-10-03 (Forecasting)

References

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1. Meenagh, David & Minford, Patrick & Peel, David, 2006. "Simulating Stock Returns under switching regimes - a new test of market efficiency," Cardiff Economics Working Papers E2006/13, Cardiff University, Cardiff Business School, Economics Section.
   
   • Meenagh, David & Minford, Patrick & Peel, David, 2007. "Simulating stock returns under switching regimes - A new test of market efficiency," Economics Letters, Elsevier, vol. 94(2), pages 235-239, February.
   • Meenagh, David & Minford, Patrick & Peel, David, 2006. "Simulating Stock Returns Under Switching Regimes - A New Test of Market Efficiency," CEPR Discussion Papers 5614, C.E.P.R. Discussion Papers.
2. De Long, J Bradford & Andrei Shleifer & Lawrence H. Summers & Robert J. Waldmann, 1990. "Noise Trader Risk in Financial Markets," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 703-38, August.
   
   • J. Bradford De Long & Andrei Shleifer & Lawrence H. Summers & Robert J. Waldmann, . "Noise Trader Risk in Financial Markets," J. Bradford De Long's Working Papers _124, University of California at Berkeley, Economics Department.
   • De Long, J. Bradford & Shleifer, Andrei & Summers, Lawrence H. & Waldmann, Robert J., 1990. "Noise Trader Risk in Financial Markets," Scholarly Articles 3725552, Harvard University Department of Economics.
3. Benartzi, Shlomo & Thaler, Richard H, 1995. "Myopic Loss Aversion and the Equity Premium Puzzle," The Quarterly Journal of Economics, MIT Press, vol. 110(1), pages 73-92, February.
   
   • Shlomo Benartzi & Richard H. Thaler, 1993. "Myopic Loss Aversion and the Equity Premium Puzzle," NBER Working Papers 4369, National Bureau of Economic Research, Inc.
4. Cheol-Ho Park & Scott H. Irwin, 2007. "What Do We Know About The Profitability Of Technical Analysis?," Journal of Economic Surveys, Wiley Blackwell, vol. 21(4), pages 786-826, 09.

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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:

1. Progress & data in economics
   by chris dillow in Stumbling and Mumbling on 2009-10-19 13:55:25

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Cited by:

1. ap Gwilym, Rhys, 2009. "The Monetary Policy Implications of Behavioral Asset Bubbles," Cardiff Economics Working Papers E2009/18, Cardiff University, Cardiff Business School, Economics Section.

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