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Statistical Properties of a Heterogeneous Asset Pricing Model with Time-varying Second Moment

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Book cover The Complex Networks of Economic Interactions

Part of the book series: Lecture Notes in Economics and Mathematical Systems ((LNE,volume 567))

Summary

Stability and bifurcation analysis of deterministic systems has been widely used in modeling financial markets. However, the impact of such dynamic phenomena on various statistical properties of the corresponding stochastic model, including skewness and excess kurtosis, various autocorrelation (AC) patterns of under and over reactions, and volatility clustering characterised by the long-range dependence of ACs, is not clear and has been very little studied. This paper aims to contribute to this issue. Through a simple behavioural asset pricing model with fundamentalists and chartists, we examine the statistical properties of the model and their connection to the dynamics of the underlying deterministic model. In particular, our analysis leads to some insights into various mechanisms that may generate some of the stylised facts, such as fat tails, skewness, high kurtosis and long memory, observed in high frequency financial data.

Financial support for Duo Wang by NSFC.10271007 and RFDP.20010001042 is acknowledged. This paper was prepared when Wang was visiting the University of Technology, Sydney, whose hospitality is gratefully acknowledged.

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Author information

Authors and Affiliations

  1. School of Finance and Economics, University of Technology, Sydney, PO Box, 123 Broadway, NSW, 2007, Australia

    Carl Chiarella & Xue-Zhong He

  2. LMAM, Department of Financial Mathematics, School of Mathematical Sciences, Peking University, Beijing, 100871, People’s Republic of China

    Duo Wang

Authors
  1. Carl Chiarella
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  2. Xue-Zhong He
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  3. Duo Wang
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Editor information

Editors and Affiliations

  1. Department of Computer Science, National Defense Academy, 1-10-20, Hashirimizu, Yokosuka, 239-8686, Japan

    Akira Namatame

  2. Division of Social Sciences, International Christian University (ICU), Osawa, Mitaka, Tokyo, 181-8585, Japan

    Taisei Kaizouji

  3. Department of Commerce, Chuo University, 3-11, Tama, Tokyo, 180-8585, Japan

    Yuuji Aruka

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© 2006 Springer-Verlag Berlin Heidelberg

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Chiarella, C., He, XZ., Wang, D. (2006). Statistical Properties of a Heterogeneous Asset Pricing Model with Time-varying Second Moment. In: Namatame, A., Kaizouji, T., Aruka, Y. (eds) The Complex Networks of Economic Interactions. Lecture Notes in Economics and Mathematical Systems, vol 567. Springer, Berlin, Heidelberg. https://doi.org/10.1007/3-540-28727-2_7

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