Behavioral heterogeneity in stock prices

Journal of Economic Dynamics and Control

Volumn 31, Issue 6, 2007, Pages 1938-1970

  Boswijk, H Peter ^a   Hommes, Cars H ^a   Manzan, Sebastiano ^b  

^a UNIVERSITY OF AMSTERDAM   (Netherlands)

^b UNIVERSITY OF LEICESTER   (United Kingdom)

Author keywords

Behavioral finance; Bounded rationality; Bubbles; Evolutionary selection; Heterogeneous expectations; Stock prices

Indexed keywords

EID: 33750996374     PISSN: 01651889     EISSN: None     Source Type: Journal    
DOI: 10.1016/j.jedc.2007.01.001     Document Type: Article

References (62)

1. Alfarano S., Lux T., and Wagner F. Estimation of agent-based models: the case of an asymmetric herding model. Computational Economics 26 (2005) 19-49
2. Anderson S., de Palma A., and Thisse J. Discrete Choice Theory of Product Differentiation (1993), MIT Press, Cambridge
3. Baak S.J. Tests for bounded rationality with a linear dynamic model distorted by heterogeneous expectations. Journal of Economic Dynamics and Control 23 (1999) 1517-1543
4. Barberis N., and Thaler R. A survey of behavioral finance. In: Constantinides G.M., Harris M., and Stulz R. (Eds). Handbook of the Economics of Finance (2003), Elsevier, Amsterdam
5. Barberis N., Shleifer A., and Vishny R. A model of investor sentiment. Journal of Financial Economics 49 (1998) 307-343
6. Barsky R.B., and deLong J.B. Why does the stock market fluctuate?. Quarterly Journal of Economics 58 (1993) 291-311
7. Biais, B., Bossaerts, P., Spatt, C., 2003. Equilibrium asset pricing under heterogeneous information. Mimeo.
8. Blanchard O.J., and Watson M.W. Bubbles rational expectations and financial markets. In: Wachtel P. (Ed). Crisis in the Economic and Financial System (1982), Lexington Books, Quebec 295-315
9. Blume L., Easley D., and O'Hara M. Market statistics and technical analysis: the role of volume. Journal of Finance 49 (1994) 153-181
10. Brock W.A., and Hommes C.H. A rational route to randomness. Econometrica 65 (1997) 1059-1095
11. Brock W.A., and Hommes C.H. Heterogeneous beliefs and routes to chaos in a simple asset pricing model. Journal of Economic Dynamics and Control 22 (1998) 1235-1274
12. Brooks C., and Katsaris A. A three-regime model of speculative behaviour: modelling the evolution of the S&P500 composite index. Economic Journal 115 (2005) 767-797
13. Campbell, J.Y., Shiller, R.J., 2005. Valuation ratios and the long-run stock market outlook: an update. In: Thaler, R.H. (Ed.), Advances in Behavioral Finance, vol. 2, Princeton University Press, pp. 173-201.
14. Chavas J.P. On information and market dynamics: the case of the U.S. beef market. Journal of Economic Dynamics and Control 24 (2000) 833-853
15. Chen J., Hong H., and Stein J.C. Breadth of ownership and stock returns. Journal of Financial Economics 66 (2002) 171-205
16. Cutler D., Poterba J., and Summers L. Speculative dynamics. Review of Economic Studies 58 (1991) 529-546
17. Daniel K., Hirshleifer D., and Subrahmanyam A. Investor psychology and security market under- and overreactions. Journal of Finance 53 (1998) 1839-1885
18. de Bondt W., and Thaler R. Does the stock market overreact?. Journal of Finance 42 (1985) 557-581
19. de Grauwe P., and Grimaldi M. Exchange rate puzzles: a tale of switching attractors. European Economic Review 50 (2006) 1-33
20. Diba B.T., and Grossman H.I. Explosive rational bubbles in stock prices?. American Economic Review 78 (1988) 520-530
21. Diether K.B., Malloy C.J., and Scherbina A. Differences of opinion and the cross section of stock returns. Journal of Finance 57 5 (2002) 2113-2141
22. Evans G.W. Pitfalls in testing for explosive bubbles in asset prices. American Economic Review 81 (1991) 922-930
23. Fama E.F., and French K.R. Disappearing dividends: changing firm characteristics or lower propensity to pay?. Journal of Financial Economics 60 (2001) 3-43
24. Fama E.F., and French K.R. The equity premium. Journal of Finance 57 (2002) 637-659
25. Fisher K.L., and Statman M. Blowing bubbles. Journal of Psychology and Financial Markets 3 (2002) 53-65
26. Flood R.P., and Hodrick R.J. On testing for speculative bubbles. Journal of Economic Perspectives 4 (1990) 85-101
27. Frankel J.A., and Froot K.A. Using survey data to test standard propositions regarding exchange rate expectations. American Economic Review 77 (1987) 133-153
28. Frankel J.A., and Froot K.A. Chartists, fundamentalists, and trading in the foreign exchange market. American Economic Review 80 (1990) 181-185
29. Gilli M., and Winker P. A global optimization heuristic for estimating agent based models. Computational Statistics & Data Analysis 42 (2003) 299-312
30. Gordon M. The Investment Financing and Valuation of the Corporation (1962), Irwin, Homewood, IL
31. Grundy B.D., and Kim Y. Stock market volatility in an heterogeneous information economy. Journal of Financial and Quantitative Analysis 37 (2002) 1-27
32. Hansen B. Inference when a nuisance parameter is not identified under the null hypothesis. Econometrica 64 (1996) 413-430
33. Harris M., and Raviv A. Differences of opinion make a horse race. Review of Financial Studies 6 (1993) 473-506
34. Heaton, J., Lucas, D., 1999. Stock prices and fundamentals. In: NBER Macroeconomic Annual, pp. 213-241.
35. Hellwig M.F. Rational expectations equilibrium with conditioning on past prices: a mean-variance example. Journal of Economic Theory 26 (1982) 279-312
36. Hirshleifer D. Investor psychology and asset pricing. Journal of Finance 56 (2001) 1533-1597
37. Hommes, C.H., 2006. Heterogeneous agent models in economics and finance. In: Tesfatsion, L., Judd, K.J., (Eds.), Handbook of Computational Economics, vol. 2, Agent-Based Computational Economics, North-Holland, Amsterdam, pp. 1109-1186.
38. Hommes C.H., Sonnemans J., Tuinstra J., and van de Velden H. Coordination of expectations in asset pricing experiments. Review of Financial Studies 18 (2005) 955-980
39. Hong H., and Stein J. A unified theory of underreaction, momentum trading and overreaction in asset markets. Journal of Finance 54 (1999) 2143-2184
40. Hong H., and Stein J.C. Differences of opinion, short-sales constraints, and market crashes. Review of Financial Studies 16 2 (2003) 487-525
41. Jagannathan R., McGrattan E.R., and Scherbina A. The declining U.S. equity premium. Federal Reserve Bank of Minneapolis Quarterly Review 24 (2000) 3-19
42. Jegadeesh N., and Titman S. Returns to buying winners and selling losers: implications for stock market efficiency. Journal of Finance 48 (1993) 65-91
43. Kandel E., and Pearson N.D. Differential interpretation of public signals and trade in speculative markets. Journal of Political Economy 103 (1995) 831-872
44. Kirman A. Epidemics of opinion and speculative bubbles in financial markets. In: Taylor M.P. (Ed). Money and Financial Markets (1991), MacMillan, New York
45. Kirman A. Ants, rationality and recruitment. Quarterly Journal of Economics 108 (1993) 137-156
46. LeRoy S.F., and Porter R.D. The present-value relation: tests based on implied variance bounds. Econometrica 49 (1981) 97-113
47. Miller E.M. Risk, uncertainty, and divergence of opinion. Journal of Finance 32 (1977) 1151-1168
48. Ofek E., and Richardson M. The valuation and market rationality of internet stock prices. Oxford Review of Economic Policy 18 (2002) 265-287
49. Ofek E., and Richardson M. Dotcom mania: the rise and fall of internet stock prices. Journal of Finance 53 (2003) 1113-1137
50. Poterba J.M., and Summers L.H. Mean reversion in stock prices: evidence and implications. Journal of Financial Economics 22 (1988) 27-59
51. Shiller R.J. Do stock prices move too much to be justified by subsequent changes in dividends?. American Economic Review 71 (1981) 421-436
52. Shiller R.J. Stock prices and social dynamics. Brookings Papers in Economic Activity 2 (1984) 457-510
53. Shiller R.J. Market Volatility (1989), MIT Press, Cambridge
54. Shiller R.J. Measuring bubble expectations and investor confidence. Journal of Psychology and Financial Markets 1 (2000) 49-60
55. Smith V., Suchanek G.L., and Williams A.W. Bubbles, crashes and endogenous expectations in experimental spot asset markets. Econometrica 56 (1988) 1119-1151
56. Summers L.H. Does the stock market rationally reflect fundamental values?. Journal of Finance 41 (1986) 591-602
57. Teräsvirta T. Specification, estimation, and evaluation of smooth transition autoregressive models. Journal of the American Statistical Association 89 (1994) 208-218
58. van Norden S., and Schaller H. Speculative behavior, regime-switching, and stock market crashes. In: Rothman P. (Ed). Nonlinear Time Series Analysis of Economic and Financial Data (1999), Kluwer, Dordrecht 321-356
59. Vissing-Jorgensen A. Perspectives on behavioral finance: does 'irrationality' disappear with wealth? Evidence from expectations and actions. In: Gertler M., and Rogoff K. (Eds). NBER Macroeconomics Annual (2003), MIT Press, Cambridge
60. West K.D. A specification test for speculative bubbles. Quarterly Journal of Economics 102 (1987) 553-580
61. Westerhoff F.H., and Reitz S. Nonlinearities and cyclical behavior: the role of chartists and fundamentalists. Studies in Nonlinear Dynamics & Econometrics 7 4 (2003)
62. Winker, P., Gilli, M., 2001. Indirect estimation of the parameters of agent based models of financial markets. FAME Research Paper, University of Geneva, number 38.