Revisiting the Excess Volatility Puzzle Through the Lens of the Chiarella Model (opens in new tab)

arXiv:2505.07820v3 Announce Type: replace-cross Abstract: We amend and extend the Chiarella model of financial markets to deal with arbitrary long-term value drifts in a consistent way. This allows us to improve upon existing calibration schemes, opening the possibility of calibrating individual monthly time series instead of classes of time series. The technique is employed on spot prices of four asset classes from ca. 1800 onward (stock indices, bonds, commodities, currencies). The so-calle...