Resource title

Asset Price Dynamics in a Model of Investors Operating on Different Time Horizons

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Resource description

We present a dynamic asset pricing model based on a heterogenous class of traders. These traders are homogenous in the sense that they are fundamentalists who base their investment decisions on an exogenoulsy given fundamental value. They are heterogenous in the sense that each trader is working with a different frequency of the underlying price data. As a result we have a system of interacting investors who together influence the market price. We derive a system that characterizes out-of-equilibrium dynamics of prices in this market which is structurally equivalent to the Nosé-Hoover thermostat equation in non-equilibrium thermodynamics. We explore the time series properties of these prices and find that they exhibit fat tails of returns distributions, volatility clustering and power laws. (author's abstract) ; Series: Working Papers SFB "Adaptive Information Systems and Modelling in Economics and Management Science"

Resource author

Stefan Thurner, Engelbert J. Dockner, Andrea Gaunersdorfer

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Resource publish date

Resource language

en

Resource content type

application/pdf

Resource resource URL

http://epub.wu.ac.at/786/1/document.pdf

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