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ASSET PRICES AND TRADING IN COMPLETE MARKET ECONOMIES WITH
HETEROGENEOUS AGENTS
by
Costas Xiouros
A Dissertation Presented to the
FACULTY OF THE GRADUATE SCHOOL
UNIVERSITY OF SOUTHERN CALIFORNIA
In Partial Fulfillment of the
Requirements for the Degree
DOCTOR OF PHILOSOPHY
(BUSINESS ADMINISTRATION)
May 2009
Copyright 2009 Costas Xiouros
Object Description
| Title | Asset prices and trading in complete market economies with heterogeneous agents |
| Author | Xiouros, Costas |
| Author email | xiouros@usc.edu; cxiouros@gmail.com |
| Degree | Doctor of Philosophy |
| Document type | Dissertation |
| Degree program | Business Administration |
| School | Marshall School of Business |
| Date defended/completed | 2009-03-09 |
| Date submitted | 2009 |
| Restricted until | Unrestricted |
| Date published | 2009-04-28 |
| Advisor (committee chair) | Zapatero, Fernando |
| Advisor (committee member) |
Jones, Christopher Sangvinatsos, Antonios Magill, Michael |
| Abstract | This thesis examines how and to what extend certain types of heterogeneity of agents in an economy with complete financial markets can explain the variation in aggregate prices and the volume of trade that we observe. There are a number of characteristics of the financial markets that have been particularly puzzling researchers; most important of which are the fact that the level of the market is on average low in comparison to interest rates, it varies a lot over time while the fundamentals of the economy do not and the fact that agents trade too much to be justified by the standard view that we hold for the economy. One clue that is found in the data is that the amount of trading is related to prices in a couple of ways like volatility or whether the market is moving upwards or downwards. This implies that the market is moved partly by the same forces that make agents to trade and at the basis of it is that agents are heterogeneous. I consider two types of heterogeneities in three separate studies. I first analyze an economy where agents differ in their risk preferences and I find with a realistic set of parameters that it cannot be a noticeable driver of the phenomena that I examine. In the other two studies I look at economies where agents differ in their beliefs about the future. These two studies yield a number of positive results: (i) high variation in the level of the prices can be explained by variations in the level of heterogeneity of beliefs and in particular the phenomenal increase in prices over the 1990s, (ii) price characteristics can be connected with trading volume through sentiment risk which determines how volatile individual beliefs are and (iii) both heterogeneity of beliefs as well as sentiment risk could possibly explain the low level of prices. The studies are mostly theoretical but some empirical support is provided. |
| Keyword | financial prices; trading volume; complete markets; heterogeneous agents |
| Language | English |
| Part of collection | University of Southern California dissertations and theses |
| Publisher (of the original version) | University of Southern California |
| Place of publication (of the original version) | Los Angeles, California |
| Publisher (of the digital version) | University of Southern California. Libraries |
| Provenance | Electronically uploaded by the author |
| Type | texts |
| Legacy record ID | usctheses-m2140 |
| Rights | Xiouros, Costas |
| Repository name | Libraries, University of Southern California |
| Repository address | Los Angeles, California |
| Repository email | http://www.usc.edu/isd/libraries/services/ask_a_librarian/email/ |
| Filename | etd-Xiouros-2871 |
| Archival file | uscthesesreloadpub_Volume29/etd-Xiouros-2871.pdf |
Description
| Title | Page 1 |
| Full text | ASSET PRICES AND TRADING IN COMPLETE MARKET ECONOMIES WITH HETEROGENEOUS AGENTS by Costas Xiouros A Dissertation Presented to the FACULTY OF THE GRADUATE SCHOOL UNIVERSITY OF SOUTHERN CALIFORNIA In Partial Fulfillment of the Requirements for the Degree DOCTOR OF PHILOSOPHY (BUSINESS ADMINISTRATION) May 2009 Copyright 2009 Costas Xiouros |
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