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Title: Estimating behavioural heterogeneity under regime switching
Authors: Chiarella, Carl
He, Xue-Zhong
Huang, Weihong
Zheng, Huanhuan
Keywords: DRNTU::Business::General::Economic and business aspects
Issue Date: 2012
Source: Chiarella, C., He, X. Z., Huang, W., & Zheng, H. (2012). Estimating behavioural heterogeneity under regime switching. Journal of Economic Behavior & Organization, 83(3), 446-460.
Series/Report no.: Journal of economic behavior & organization
Abstract: Financial markets are typically characterized by high (low) price level and low (high) volatility during boom (bust) periods, suggesting that price and volatility tend to move together with different market conditions/states. By proposing a simple heterogeneous agent model of fundamentalists and chartists with Markov chain regime-dependent expectations and applying the S&P 500 data from January 2000 to June 2010, we show that the estimation of the model matches well with the boom and bust periods in the US stock market. In addition, we find evidence of time-varying behavioural heterogeneity within-group and that the model exhibits good forecasting accuracy.
ISSN: 0167-2681
DOI: 10.1016/j.jebo.2012.02.014
Fulltext Permission: none
Fulltext Availability: No Fulltext
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