Financial Innovation· 2026Q1
Investor heterogeneity and stock market volatility: cross-country evidence from an extended heterogeneous agent model
- 0citations
- Q1SCImago
- 2026year
Short summary
A new composition-weighted heterogeneity intensity measure, combining belief differentials and investor participation, strongly and robustly predicts stock market volatility across 12 developed and emerging markets.
AI-generated from the title and abstract; the full text is not read.
Key points
- Introduced a composition-weighted heterogeneity intensity measure combining belief differentials and endogenous investor composition.
- Found this measure strongly and robustly positively associated with stock market volatility.
- Belief-gap measure alone was not systematically related to realized volatility.
- Analyzed equity index data from 12 developed and emerging markets (2010-2023) at multiple frequencies.
AI-generated from the title and abstract; the full text is not read.
Abstract
We study how investor heterogeneity relates to stock-market volatility in a cross-country setting using an extended fundamentalist–chartist heterogeneous agent model (HAM). We propose a time-varying heterogeneity intensity measure that combines belief differentials with endogenous investor composition to capture composition-weighted heterogeneity. Using equity index data for 12 developed and emerging markets over 2010–2023 at multiple sampling frequencies, we estimate the model for each market under a harmonized protocol. Across markets and specifications, the belief-gap measure alone is not systematically related to realized volatility, whereas the composition-weighted heterogeneity intensity exhibits a strong and robust positive association with volatility. The results highlight the importance of incorporating both heterogeneous beliefs and participation dynamics in behavioral asset-pricing frameworks and provide a parsimonious metric for characterizing time-varying heterogeneity in international equity markets.
The authors' abstract, as published at the source. Financial Innovation, 2026 · DOI ↗
Continue with a free account
Ask the paper: 3 free questions a day about this paper; save it, get its citation, new summaries every day for your field. Takeaways are Premium.
Continue free on the webSign in with Google or Apple; no card needed. You come back to this paper.
On your phone:
Field: Economics and Econometrics
Economics and EconometricsEconomics, Econometrics and Finance