IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Asset Price Dynamics And Aggregation

Listed author(s):
  • Michael Binder, M.Hashem Pesaran

    (University of Cambridge)

This paper aims to develop a model of trading in the stock market that can shed light on the sources of several widely reported empirical features of stock markets, including occasional predictability of excess returns using public information, 'excess volatility', and predictability of trading volume and volatility. Traders, drawing on both public and private information, make use of recursive modelling techniques to select and update their statistical model used to predict future excess returns of the various stocks traded in the market. This leads to continued disparities in traders' beliefs about future excess returns even in the absence of unobserved variations in the net supply of shares. It is shown that aggregation across traders as well as stocks then implies that an econometrician having access to public information only may find the presence of features such as 'excess volatility' and predictability of trading volume and volatility in market excess return/price data. This is even though the scope for individual traders to successfully predict excess returns on individual stocks is very limited. Simulation analysis is used to assess the model's effectiveness in explaining U.S. stock market data quantitatively.

To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

Paper provided by Society for Computational Economics in its series Computing in Economics and Finance 2000 with number 296.

in new window

Date of creation: 05 Jul 2000
Handle: RePEc:sce:scecf0:296
Contact details of provider: Postal:
CEF 2000, Departament d'Economia i Empresa, Universitat Pompeu Fabra, Ramon Trias Fargas, 25,27, 08005, Barcelona, Spain

Fax: +34 93 542 17 46
Web page:

More information through EDIRC

No references listed on IDEAS
You can help add them by filling out this form.

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

When requesting a correction, please mention this item's handle: RePEc:sce:scecf0:296. 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: (Christopher F. Baum)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.