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Abstract

The VAR approach for testing present value models is applied to a heterogeneous-agent asset pricing model, using historical observations of the SandP500 index. Besides fundamentalists, who value assets according to expected dividends, the model features rational and contrarianspeculators. Agents choose their strategy based on evolutionary considerations. Supplementing the standard present value model with speculative agents dramatically improves the model’s ability to replicate observed market dynamics. In particular the existence of contrarians canexplain some of the most volatile episodes including the 1990s bubble, suggesting this was not a rational bubble.



Item Type: MPRA Paper -

Original Title: Rational Speculators, Contrarians and Excess Volatility-

Language: English-

Keywords: asset pricing, heterogeneous agents, VAR approach-

Subjects: C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C51 - Model Construction and EstimationD - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D84 - Expectations ; SpeculationsG - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions-





Autor: Lof, Matthijs

Fuente: https://mpra.ub.uni-muenchen.de/50340/







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