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Asset Pricing with Social Interactions, Adaptive Learning, and Differences in Opinion - DP130103210

Funding: 2013: $76,000
2014: $65,000
2015: $70,000

Project Member(s): He, X.

Funding or Partner Organisation: Queen's University Belfast
Australian Research Council (ARC Discovery Projects)

Start year: 2013

Summary: Due to major changes in technological innovation and global competition and connection of financial markets, informed, but not infallible investors, learn from and adapt to these changes in highly competitive and adaptive markets. This project aims to develop a broader framework of evolutionary asset pricing models to analyse the impact of social interactions, adaptive learning, and differences in opinion of investors on asset prices. It will seek to develop novel empirical hypotheses and tests that relate social interactions and adaptive learning behaviour to the dynamics of market risk premia, volatility, trading volume and patterns, and provide implications for policy and market regulation

Publications:

Dieci, R & He, XT 2018, 'Heterogeneous Agent Models in Finance' in Hommes, C & LeBaron, B (eds), Handbook of Computational Economics, Elsevier, pp. 257-328.
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He, XZ, Li, K & Li, Y 2018, 'Asset allocation with time series momentum and reversal', Journal of Economic Dynamics and Control, vol. 91, pp. 441-457.
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He, X-Z, Li, K & Wang, C 2018, 'Time-varying economic dominance in financial markets: A bistable dynamics approach.', Chaos, vol. 28, no. 5, pp. 1-19.
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Chiarella, C, He, XZ, Shi, L & Wei, L 2017, 'A behavioural model of investor sentiment in limit order markets', Quantitative Finance, vol. 17, no. 1, pp. 71-86.
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He, X & Shi, L 2017, 'Index Portfolio and Welfare Analysis Under Heterogeneous Beliefs', Journal of Banking and Finance, vol. 75, pp. 64-79.
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He, X & Treich, N 2017, 'Prediction market prices under risk aversion and heterogeneous beliefs', Journal of Mathematical Economics, vol. 70, pp. 105-114.
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He, XZ & Li, Y 2017, 'The Adaptiveness in Stock Markets: Testing the Stylized Facts in the DAX 30', Journal of Evolutionary Economics, vol. 27, no. 5, pp. 1071-1094.
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Wei, L, Xiong, X, Zhang, W, He, XT & Zhang, Y 2017, 'The effect of genetic algorithm learning with a classifier system in limit order markets', Engineering Applications of Artificial Intelligence, vol. 65, pp. 436-448.
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He, X, Li, K & Shi, L 2017, 'Social interactions, stochastic volatility, and momentum', SSRN.

He, X, Li, K & Wang, C 2016, 'Volatility clustering: A nonlinear theoretical approach', Journal of Economic Behavior & Organization, vol. 130, pp. 274-297.
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He, XZ & Zheng, H 2016, 'Trading heterogeneity under information uncertainty', Journal of Economic Behavior and Organization, vol. 130, pp. 64-80.
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Shi, L 2016, 'Consumption-based CAPM with belief heterogeneity', JOURNAL OF ECONOMIC DYNAMICS & CONTROL, vol. 65, pp. 30-46.
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Afifovic, J, Chiarella, C, He, X & Wei, L 2016, 'High frequency trading and learning in a dynamic limit order market', The Inaugural Workshop on the Complex Information and Financial Market Dydnmics, Tianjin, China.

Arifovic, J, Chiarella, C, He, X & Wei, L 2016, 'High frequency trading and learning in a dynamic limit order market', Quantitative Methods in Finance, Sydney.

Arifovic, J, Chiarella, C, He, X & Wei, L 2016, 'High frequency trading and learning in a dynamic limit order market', International Conference on Computing in Economics and Finance, Bordeaux.
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He, X, Li, K & Li, Y 2016, 'Asset allocation with time series momentum and reversal', Proceeding of China International Conference in Finance, China International Conference in Finance, CICF, Xiamen, China.
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He, X, Li, K & Shi, L 2016, 'A simple asset pricing model with social interaction and differences in opinion', International Conference on Applied Financial Economics, Shanghai, China.

Chiarella, C, He, X & Wei, L 2015, 'Learning, information processing and order submission in limit order markets', Journal of Economic Dynamics and Control, vol. 61, pp. 245-268.
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Chiarella, C, Ter Ellen, S, He, X-Z & Wu, E 2015, 'Fear or fundamentals? Heterogeneous beliefs in the European sovereign CDS market', Journal of Empirical Finance, vol. 32, pp. 19-34.
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He, X & Li, K 2015, 'Profitability of time series momentum', Journal of Banking and Finance, vol. 53, pp. 140-157.
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He, X-Z & Li, Y 2015, 'Testing of a market fraction model and power-law behaviour in the DAX 30', JOURNAL OF EMPIRICAL FINANCE, vol. 31, pp. 1-17.
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Wei, L, Zhang, W, Xiong, X & Shi, L 2015, 'Position limit for the CSI 300 stock index futures market', ECONOMIC SYSTEMS, vol. 39, no. 3, pp. 369-389.
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He, X, Li, K & Shi, L 2015, 'A simple asset pricing model with social interaction and differences in opinion', 9th International Conference on Nonlinear Economic Dynamics (NED 2015), International Conference on Nonlinear Economic Dynamics, Tokyo.

He, X, Li, K & Shi, L 2015, 'Optimal time series momentum', 3rd NUS Workshop on Risk and Regulation, NUS Workshop on Risk and Regulation, Singapore.
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He, X, Shi, L & Zheng, M 2012, 'Heterogeneous Beliefs and the Cross-Section of Asset Returns', SSRN.

Keywords: asset price dynamics,heterogeneous beliefs,bounded rationality

FOR Codes: Finance, Finance Services, Banking, Finance and Investment not elsewhere classified, Investment Services (excl. Superannuation), Stochastic Analysis and Modelling, Market-Based Mechanisms