Diversification effect of heterogeneous beliefs

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Computational Methods in Economic Dynamics, 2011, 1, pp. 57 - 75
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Within the framework of Chiarella et al (2009b) on MV analysis, this paper examines the impact of the heterogeneity and bounded rationality on the market equilibrium and MV efficiency of the optimal portfolios. The heterogeneity is characterised by the heterogeneous beliefs about the returns of the risky assets, while the bounded rationality corresponds to the MV optimisation of investors based on their beliefs.
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