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Heterogeneous Beliefs with Mortal Agents

In: Recent Advances In Financial Engineering 2009

Author

Listed:
  • A. A. Brown

    (Statistical Laboratory, University of Cambridge, USA)

  • L. C. G. Rogers

    (Statistical Laboratory, University of Cambridge, USA)

Abstract

This paper will examine a model with many agents, each of whom has a different belief about the dynamics of a risky asset. The agents are Bayesian and so learn about the asset over time. All agents are assumed to have a finite (but random) lifetime. When an agent dies, he passes his wealth (but not his knowledge) onto his heir. As a result, the agents never become sure of the dynamics of the risky asset. We derive expressions for the stock price and riskless rate. We then use numerical examples to exhibit their behaviour.

Suggested Citation

  • A. A. Brown & L. C. G. Rogers, 2010. "Heterogeneous Beliefs with Mortal Agents," World Scientific Book Chapters, in: Masaaki Kijima & Chiaki Hara & Keiichi Tanaka & Yukio Muromachi (ed.), Recent Advances In Financial Engineering 2009, chapter 3, pages 65-89, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789814304078_0003
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