Theoretical and empirical analysis of heterogeneity in the capital markets
|Author:||PhDr. Fuchsová Dita|
|Year:||2004 - summer|
|Leaders:|| prof. Ing. Miloslav Vošvrda CSc.
|Work type:|| Doctoral
|Awards and prizes:|
|Abstract:||The Efficient Market Hypothesis asserts that the prices of securities correctly and fully reflect all available information. But there are some facts in capital markets that EMH is not able to explain. Thus this thesis chooses an alternative model, model with heterogeneous expectations introduced by Chiarella, Brock and Hommes an Goldbaum, to analyze the behaviour of agents, their choice of prediction strategy and the evolution of the price. In these models agents choose their strategy among a finite number of belief functions which are function of past observation. Their choice is based on a fitness measure attached to every belief function. This leads to evolutionary dynamics across predictor choice coupled to dynamics of equilibrum prices.These models thus incorporate a general mechanism leading to local instability of steady state and to complicated dynamics. Price is then driven by endogenous forces and does not follow its rational fundamentals. This conclusion has important consequences for financial markets and for the whole economy. At first, it says that fundamentalists or rational agents are not able to drive our chartists from the market. At second, as the main function of prïce is to alocate the financial resources among the firms these resources can not be alocated optimally when the price does not follow its fundamentals. What are then the implications for the economy?
The second part of thesis is devoted to comparison of selected models with the real data, particularly with S&P index.