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

  • Hammad A. Siddiqi

    (LUMS)

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.

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File URL: http://www.eaber.org/node/22279
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Paper provided by East Asian Bureau of Economic Research in its series Microeconomics Working Papers with number 22279.

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Date of creation: Jan 2006
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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

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