Abstract:Building on a prominent agent-based model, we present a new structural stochastic volatility asset pricing model of fundamentalists vs. chartists where the prices are determined based on excess demand. Specifically, this allows for modelling stochastic interactions between agents, based on a herding process corrected by a price misalignment, and incorporating strong noise components in the agents' demand. The model's parameters are estimated using the method of simulated moments, where the moments reflect the … Show more
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