Asset pricing with heterogeneous investment horizons

Anufriev, M; Bottazzi, G

Asset pricing with heterogeneous investment horizons

Anufriev, M

Bottazzi, G

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Publication Type:: Journal Article
Citation:: Studies in Nonlinear Dynamics and Econometrics, 2012, 16 (4)
Issue Date:: 2012-09-01

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Field	Value	Language
dc.contributor.author	Anufriev, M https://orcid.org/0000-0002-1842-6814	en_US
dc.contributor.author	Bottazzi, G	en_US
dc.date.issued	2012-09-01	en_US
dc.identifier.citation	Studies in Nonlinear Dynamics and Econometrics, 2012, 16 (4)	en_US
dc.identifier.issn	1081-1826	en_US
dc.identifier.uri	http://hdl.handle.net/10453/22012
dc.description.abstract	We consider an analytically tractable asset pricing model describing the trading activity in a stylized market with two assets. Traders are boundedly rational expected utility maximizers with different beliefs about future prices and different investment horizons. In particular, we analyze the effects of the latter source of heterogeneity on the dynamics of price. We find that in the case with homogeneous agents, longer investment horizons lead to more stable dynamics. This is not true, however, in the case of a mixed population of traders, when the increase of heterogeneity in the investment horizons can introduce instability in the system. Furthermore, the role of heterogeneity turns out to be different for different trading behaviors and its effect on the aggregate dynamics depends on the whole ecology of agents' beliefs. Copyright © 2012 De Gruyter.	en_US
dc.relation.ispartof	Studies in Nonlinear Dynamics and Econometrics	en_US
dc.relation.isbasedon	10.1515/1558-3708.1903	en_US
dc.subject.classification	Econometrics	en_US
dc.title	Asset pricing with heterogeneous investment horizons	en_US
dc.type	Journal Article
utslib.citation.volume	4	en_US
utslib.citation.volume	16	en_US
utslib.for	0102 Applied Mathematics	en_US
utslib.for	1401 Economic Theory	en_US
utslib.for	1403 Econometrics	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Economics Discipline
utslib.copyright.status	closed_access
pubs.issue	4	en_US
pubs.publication-status	Published	en_US
pubs.volume	16	en_US

Abstract:

We consider an analytically tractable asset pricing model describing the trading activity in a stylized market with two assets. Traders are boundedly rational expected utility maximizers with different beliefs about future prices and different investment horizons. In particular, we analyze the effects of the latter source of heterogeneity on the dynamics of price. We find that in the case with homogeneous agents, longer investment horizons lead to more stable dynamics. This is not true, however, in the case of a mixed population of traders, when the increase of heterogeneity in the investment horizons can introduce instability in the system. Furthermore, the role of heterogeneity turns out to be different for different trading behaviors and its effect on the aggregate dynamics depends on the whole ecology of agents' beliefs. Copyright © 2012 De Gruyter.

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http://hdl.handle.net/10453/22012