IJPAM: Volume 76, No. 5 (2012)

ASSET PRICING MODEL WITH
HETEROGENEOUS AGENTS: THE WEALTH DYNAMICS

Serena Brianzoni$^1$, Cristiana Mammana$^2$, Elisabetta Michetti$^3$
$^1$Università Politecnica delle Marche
Ancona, ITALY
$^{2,3}$Università di Macerata
Macerata, ITALY


Abstract. We develop an adaptive model which characterizes the evolution of wealth distribution when agents switch between different trading strategies. The wealth of each group is updated not only as a consequence of portfolio growth of agents adopting the relative strategy, but also due to the flow of agents coming from the other group. This switching mechanism is investigated in a Walrasian scenario and under a growing dividend process. A stationary dynamic model is obtained in terms of excess return, wealth and agent proportions, able to explain wealth distribution among agents in the long run.

Received: October 1, 2011

AMS Subject Classification: 39A28, 39A30, 39A33, 39A60

Key Words and Phrases: asset pricing, wealth dynamics, switching mechanisms, long run dynamics, trapping sets

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Source: International Journal of Pure and Applied Mathematics
ISSN printed version: 1311-8080
ISSN on-line version: 1314-3395
Year: 2012
Volume: 76
Issue: 5