This special issue is concerned with the impact of heterogeneity in beliefs on financial markets. A particular field of behavioural economics, heterogeneous agent models (HAMs), has recently been gaining more recognition in other areas particularly finance and financial markets, which is the focus here. HAMs do not assume full irrationality of investors, but assume that agents are boundedly rational, i.e. they make rational decision based on limited information sets. Moreover, different agents can make different decisions depending on their beliefs. Models based on boundedly rational agents have been relatively successful in explaining some of the stylized facts observed in financial markets, such as bubbles, crashes, volatility clustering, while some of the observed puzzles could not be explained based on conventional models and theories in finance. However, most research to date has relied on simulation-based evidence, i.e. empirical evidence from these models is lacking.
The aim of this special issue is to publish high quality research papers that enhance our understanding of the impact of heterogeneity in beliefs on financial markets. The guest editors welcome submission in any area of finance. As most of the previous studies have been of a theoretical/simulation-based nature, the guest editors seek and encourage the submission of empirical papers using real-life data that apply the principle of heterogeneity in beliefs.
Topics of interest include, but not limited to:
- The impact of heterogeneity on investment decision making
- The impact of heterogeneity in explaining volatility dynamics
- The impact of heterogeneity in explaining bubbles and crashes
- The impact of heterogeneity in explaining some of empirical puzzles
Deadline for manuscript submission: 1 September, 2010
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