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On the dynamics of asset prices and portfolios in a multiperiod CAPM

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  • Hillebrand, Marten
  • Wenzelburger, Jan

Abstract

We present a numerical case study of the dynamics of a financial market in which heterogeneous investors described by linear mean–variance preferences and multiperiod planning horizons interact. The focus is on the induced price, portfolio, and wealth processes as well as on the transaction volume. Numerical evidence is provided that multiperiod planning horizons are a natural source of empirically observed clustered volatility and that heterogeneous planning horizons may amplify booms and busts.

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  • Hillebrand, Marten & Wenzelburger, Jan, 2006. "On the dynamics of asset prices and portfolios in a multiperiod CAPM," Chaos, Solitons & Fractals, Elsevier, vol. 29(3), pages 578-594.
    • Handle: RePEc:eee:chsofr:v:29:y:2006:i:3:p:578-594
    DOI: 10.1016/j.chaos.2005.08.091
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    1. Volker Böhm & Tomoo Kikuchi & George Vachadze, 2008. "Asset Pricing and Productivity Growth: The Role of Consumption Scenarios," Computational Economics, Springer;Society for Computational Economics, vol. 32(1), pages 163-181, September.
    2. Hillebrand, Marten & Wenzelburger, Jan, 2006. "The impact of multiperiod planning horizons on portfolios and asset prices in a dynamic CAPM," Journal of Mathematical Economics, Elsevier, vol. 42(4-5), pages 565-593, August.

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