Westerhoff, Frank H.Frank H.Westerhoff0000-0003-1666-4103Franke, ReinerReinerFranke2019-09-192013-01-252012978-3-931052-93-5https://fis.uni-bamberg.de/handle/uniba/1032The paper proposes an elementary agent-based asset pricing model that, invoking the two trader types of fundamentalists and chartists, comprises four features: (i) price determination by excess demand; (ii) a herding mechanism that gives rise to a macroscopic adjustment equation for the market fractions of the two groups; (iii) a rush towards fundamentalism when the price misalignment becomes too large; and (iv) a stronger noise component in the demand per chartist trader than in the demand per fundamentalist trader, which implies a structural stochastic volatility in the returns. Combining analytical and numerical methods, the interaction between these elements is studied in the phase plane of the price and a majority index. In addition, the model is estimated by the method of simulated moments, where the choice of the moments reflects the basic stylized facts of the daily returns of a stock market index. A (parametric) bootstrap procedure serves to set up an econometric test to evaluate the model’s goodness-of-fit, which proves to be highly satisfactory. The bootstrap also makes sure that the estimated structural parameters are well identified.engStructural stochastic volatility; method of simulated moments; autocorrelation pattern; fat tails; bootstrapped p-values330workingpaperurn:nbn:de:bvb:473-opus4-24194