An Adaptive Model of Asset Price and Wealth Dynamics in a Market with Heterogeneous Trading Strategies

  • Carl Chiarella
  • Xue-Zhong He
Part of the International Handbooks Information System book series (INFOSYS)


The traditional asset-pricing models – such as the capital asset pricing model (CAPM) of [42] and [34], the arbitrage pricing theory (APT) of [40], or the intertemporal capital asset pricing model (ICAPM) of [38] – have as one of their important assumptions, investor homogeneity. In particular the paradigm of the representative agent assumes that all agents are homogeneous with regard to their preferences, their expectations and their investment strategies.1 However, as already argued by Keynes in the 1930s, agents do not have sufficient knowledge of the structure of the economy to form correct mathematical expectations that would be held by all agents.


Asset Price Trading Strategy Risky Asset Capital Asset Price Model Adaptive Model 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


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Copyright information

© Springer-Verlag Berlin Heidelberg 2008

Authors and Affiliations

  • Carl Chiarella
    • 1
  • Xue-Zhong He
    • 1
  1. 1.University of TechnologySydneyAustralia

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