Please use this identifier to cite or link to this item:
Horst, Ulrich
Year of Publication: 
Series/Report no.: 
Discussion Papers, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes 2001,36
We consider a financial market model with a large number of interacting agents. Investors are heterogeneous in their expectations about the future evolution of an asset price process. Their current expectation is based on the previous states of their neighbors and on a random signal about the \mood of the market. We analyze the asymptotics of both aggregate behaviour and asset prices. We give sufficient conditions for the distribution of equilibrium prices to converge to a unique equilibrium, and provide a microeconomic foundation for the use of diffusion models in the analysis of financial price fluctuations.
behavioral finance
diffusion models
interacting Markov chains
stochastic difference equations
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
419.41 kB

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.