Stock Dynamic Pricing Based On The Heterogeneity Of Investors

This article studies the dynamic price formation of stock from the heterogeneity of investor beliefs based on three types of asset pricing model:priori belief model, posteriori belief model and DSSW model.This paper focuses on the posteriori belief model and DSSW model because the study of prior beliefs impacting on the asset pricing has been relatively mature. The two models are extended and improved by setting up new scene and assumptions, and the new stock equilibrium price formula is obtained, the procedures can be seen in Chapter3and4.Chapter3studies the heterogeneity of investor behavior in common information from a more general angle, establishing a model to analyze the different reaction of the equilibrium price of the stock due to the investor’s variety of handling information. This part firstly derivates the static equilibrium model of stock and then extends it to the a dynamic pricing model. Considering the actual situation of stock market, the heterogeneity investors are divided into the fundamentals of investors and technical investors. The affection of the two types of investors in the stock dynamic price formation is then studied.Chapter4is based on the DSSW model in which positive feedback traders are introduced. The dynamic pricing of stock is studied for the market which includes positive feedback traders, rational traders and noise traders. After a series of rigorous derivation, the dynamic pricing formula is obtained. In order to get the pricing change of the stock, Matlab is used to simulate the process.