Advanced Search
MyIDEAS: Login to save this paper or follow this series

Is it Social Influence on Beliefs Under Ambiguity? A Possible Explanation for Volatility Clustering

Contents:

Author Info

  • Hammad A. Siddiqi

    (LUMS)

Abstract

Influencing and being influenced by others is the very essence of human behaviour. We put forward an exploratory asset-pricing model allowing for social influence on investor judgments under ambiguity. The time series of returns generated by our model displays volatility clustering, a puzzling stylised fact observed in financial markets. This suggests that social influence on investor judgments may be playing a role in generating volatility clustering.

Download Info

If 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.
File URL: http://saber.eaber.org/node/22279
Download Restriction: no

Bibliographic Info

Paper provided by East Asian Bureau of Economic Research in its series Microeconomics Working Papers with number 22279.

as in new window
Length:
Date of creation: Jan 2006
Date of revision:
Handle: RePEc:eab:microe:22279

Contact details of provider:
Postal: JG Crawford Building #13, Asia Pacific School of Economics and Government, Australian National University, ACT 0200
Web page: http://www.eaber.org
More information through EDIRC

Related research

Keywords: Social Influence; Knightian Uncertainty; Ambiguity; Volatility Clustering;

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Lux, T. & M. Marchesi, . "Scaling and Criticality in a Stochastic Multi-Agent Model of a Financial Market," Discussion Paper Serie B 438, University of Bonn, Germany, revised Jul 1998.
  2. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
  3. Engle III, Robert F., 2003. "Risk and Volatility: Econometric Models and Financial Practice," Nobel Prize in Economics documents 2003-4, Nobel Prize Committee.
  4. Matthew Rabin, 2000. "Risk Aversion and Expected-Utility Theory: A Calibration Theorem," Econometrica, Econometric Society, vol. 68(5), pages 1281-1292, September.
  5. Chiarella, Carl & He, Xue-Zhong, 2003. "Dynamics of beliefs and learning under aL-processes -- the heterogeneous case," Journal of Economic Dynamics and Control, Elsevier, vol. 27(3), pages 503-531, January.
  6. James H. Stock & Mark W. Watson, 1994. "Evidence on Structural Instability in Macroeconomic Time Series Relations," NBER Technical Working Papers 0164, National Bureau of Economic Research, Inc.
  7. Carl Chiarella & Xue-Zhong He, 1999. "Heterogeneous Beliefs, Risks and Learning in a Simple Asset Pricing Model," Research Paper Series 18, Quantitative Finance Research Centre, University of Technology, Sydney.
  8. Gilboa, Itzhak & Schmeidler, David, 1989. "Maxmin expected utility with non-unique prior," Journal of Mathematical Economics, Elsevier, vol. 18(2), pages 141-153, April.
  9. Ellison, Glenn & Fudenberg, Drew, 1993. "Rules of Thumb for Social Learning," Scholarly Articles 3196332, Harvard University Department of Economics.
  10. Brock, William A. & Hommes, Cars H., 1998. "Heterogeneous beliefs and routes to chaos in a simple asset pricing model," Journal of Economic Dynamics and Control, Elsevier, vol. 22(8-9), pages 1235-1274, August.
  11. Robert Engle, 2001. "GARCH 101: The Use of ARCH/GARCH Models in Applied Econometrics," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 157-168, Fall.
  12. LeBaron, Blake & Arthur, W. Brian & Palmer, Richard, 1999. "Time series properties of an artificial stock market," Journal of Economic Dynamics and Control, Elsevier, vol. 23(9-10), pages 1487-1516, September.
  13. Levy, H & Markowtiz, H M, 1979. "Approximating Expected Utility by a Function of Mean and Variance," American Economic Review, American Economic Association, vol. 69(3), pages 308-17, June.
  14. C. Chiarella & X-Z. He, 2001. "Asset price and wealth dynamics under heterogeneous expectations," Quantitative Finance, Taylor & Francis Journals, vol. 1(5), pages 509-526.
  15. J. Doyne Farmer & Shareen Joshi, 2000. "The price dynamics of common trading strategies," Papers cond-mat/0012419, arXiv.org.
  16. Rubenstein, A., 1991. "On Price Recognition and Computational Complexity in a Monopolistic Model," Papers 35-91, Tel Aviv.
  17. Eugene Kandel & Ben-Zion Zilberfarb, 1999. "Differential Interpretation Of Information In Inflation Forecasts," The Review of Economics and Statistics, MIT Press, vol. 81(2), pages 217-226, May.
  18. Benoit Mandelbrot, 1963. "The Variation of Certain Speculative Prices," The Journal of Business, University of Chicago Press, vol. 36, pages 394.
  19. Gaunersdorfer, A. & Hommes, C.H. & Wagener, F.O.O., 2000. "Bifurcation Routes to Volatility Clustering," CeNDEF Working Papers 00-04, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
  20. Schwert, G William, 1989. " Why Does Stock Market Volatility Change over Time?," Journal of Finance, American Finance Association, vol. 44(5), pages 1115-53, December.
  21. Steven N. Durlauf, 1991. "Nonergodic Economic Growth," NBER Working Papers 3719, National Bureau of Economic Research, Inc.
  22. Paul Davidson, 1991. "Is Probability Theory Relevant for Uncertainty? A Post Keynesian Perspective," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 129-143, Winter.
  23. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
  24. Kandel, Eugene & Pearson, Neil D, 1995. "Differential Interpretation of Public Signals and Trade in Speculative Markets," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 831-72, August.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eab:microe:22279. See general 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: (Shiro Armstrong).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.