Professor Xuezhong He

Bohm, V., Chiarella, C., He, X. & Huls, T. 2013, 'A homoclinic route to volatility: Dynamics of asset prices under autoregressive forecasting' in Gian Italo Bischi, Carl Chiarella and Iryna Sushko (eds), Global analysis of dynamic models in economics and finance: Essays in honour of Laura Gardini, Springer, Germany, pp. 289-316.

He, X. 2013, 'Recent developments in asset pricing with heterogeneous beliefs and adaptive behaviour of financial markets' in Gian Italo Bischi, Carl Chiarella and Iryna Sushko (eds), Global analysis of dynamic models in economics and finance: Essays in honour of Laura Gardini, Springer, Germany, pp. 3-34.

He, X. & Shi, L. 2011, 'Diversification effect of heterogeneous beliefs' in H Dawid and W Semmler (eds), Computational Methods in Economic Dynamics, Springer, US, pp. 57-75.
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Within the framework of Chiarella et al (2009b) on MV analysis, this paper examines the impact of the heterogeneity and bounded rationality on the market equilibrium and MV efficiency of the optimal portfolios. The heterogeneity is characterised by the heterogeneous beliefs about the returns of the risky assets, while the bounded rationality corresponds to the MV optimisation of investors based on their beliefs.

Chiarella, C., Dieci, R. & He, X. 2010, 'A framework for CAPM with heterogeneous beliefs' in Bischi, GI; Chiarella, C; Gardini, L (eds), Nonlinear Dynamics in Economics, Finance and the Social Sciences: Essays in Honour of John Barkley Rosser Jr, Springer, US, pp. 353-369.
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The Sharpe~Lintnel~Mossin (Sharpe 1964; Lintner 1965; Mossin 1966) Capital Assel Pricing Model (CAPM) plays a central role in modern finance theory. It is founded on the paradigm of humogeneous beliefs and a rational representarive agent. However, from a theoretical perspective this paradigm has been criticized on a number of grounds, in particular concerning liS: extreme assumptions about homoge~ neous beliefs, information about the economic envlronment, and the computational ability on the part of the ratIonal representative economic agent

He, X. & Shi, L. 2010, 'Portfolio efficiency under heterogeneous beliefs' in Kijima, M; Hara, C; Tanaka, K; Muromachi, Y (eds), Recent Advances in Financial Engineering, World Scientific, Singapore, pp. 127-156.
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In the standard mean variance (MV) capital asset pricing model (CAPM) with homogeneous beliefs, the optimal portfolios of investors are MV efficient. It is expected that this is no longer true in general when investors have heterogeneous beliefs in the means. and variances/covariances of asset returns. This paper extends the s.tandard Black's zero-beta CAPM to incorporate heterogeneous beliefs and verifies that lhe subjectively optima) portfolios of heterogeneous investors are MV inefficient in generaL The paper then demonstrates that the traditional geometric relation of the mean variance frontiers with and Without the riskless asset under homogeneous beliefs does not hold in general under heterogelleous beliefs. The paper further examines the impact of biased beliefs among investors on the MY efficiency of their optimal portfolios. The results provide some explanalions on the risk premium puzzle, Miller's hypothesis, and underperfonnance of managed funds.

Chiarella, C., Dieci, R. & He, X. 2009, 'Heterogeneity, market mechanisms and asset price dynamics' in Hens, T; Schenk-Hoppe, KR (eds), Handbook of Financial Markets: Dynamics and Evolution, Elsevier, USA, pp. 277-344.
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Chiarella, C. & He, X. 2008, 'An adaptive model of asset price and wealth dynamics in a market with heterogeneous trading strategies' in Seese, D; Weinhardt, C; Schlottmann, F (eds), Handbook on Information Technology in Finance, Springer, Germany, pp. 465-499.
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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

He, X., Hamill, P. & Li, Y. 2008, 'Can Trend Followers Survive in the Long-Run? Insights from Agent-Based Modeling' in Brabazon, A; O'Neill, M (eds), Natural Computing in Computational Finance, Springer, Berlin, Germany, pp. 253-269.
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This chapter uses a simple stochastic market fraction (MF) asset pricing model to investigate market dominance, profitability, and how traders adopting fundamental analysis or trend following strategies can survive under various market conditions in the long/shoft-run. This contrasts with the modern theory of finance which relies on the paradigm of utility maximizing representative agents and rational expectations assumptions which some contemporary theorists regard as extreme. This school of thought would predict that trend followers will be driven out of the markets in the long-run. Our analysis shows that in a MF framework this is not necessarily the case and that trend followers can survive in the long-run.

Chiarella, C., Flaschel, P., He, X. & Hung, H. 2006, 'A stochastic model of real-financial interaction with boundedly rational heterogeneous agents' in Chiarella, C; Franke, R; Flaschel, P; Semmler, W (eds), Quantitative and Empirical Analysis of Nonlinear Dynamic Macromodels, Elsevier, Amsterdam, Netherlands, pp. 333-358.
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Chiarella, C., He, X. & Wang, D. 2006, 'Statistical properties of a heterogeneous asset pricing model with time-varying second moment' in Namatame, A; Kaizouji, T; Aruka, Y (eds), The Complex Networks of Economic Interactions: essays in agent-based economics & econophysics, Springer, Berlin, Germany, pp. 109-123.
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Chiarella, C. & He, X. 2005, 'An asset pricing model with adaptive heterogeneous agents and wealth effects' in Lux, T; Reitz S; Samanidou E (eds), Nonlinear Dynamics and Heterogeneous Interacting Agents, Springer, Berlin, Germany, pp. 269-285.
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The characterisation of agents' preferences by decreasing absolute risk aversion (DARA) and constant relative risk aversion (CRRA) are well documented in the literature and also supported in both empirical and experimental studies. This paper considers a financial market with heterogeneous agents having power utility functions, which are the only utility functions displaying both DARA and CRRA. By introducing a population weighted average wealth measure, we develop an adaptive model to characterise asset price dynamics as well as the evolution of population proportions and wealth dynamics. Some numerical simulations are included to illustrate the evolution of the wealth dynamics, market behaviour and market efficiency within the framework of heterogeneous agents.

Chiarella, C. & He, X. 2004, 'Dynamics of beliefs and learning under AL processes - the homogeneous case.' in Barnett, W; Deissenberg, C; Feichtinger, G (eds), Economic complexity: Non-linear dynamics, multi-agents economics, and learning, Elsevier, Amsterdam, The Netherlands, pp. 363-390.
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Chiarella, C. & He, X. 2000, 'The dynamics of the cobweb when producers are risk averse learners' in E J; Hartl Dockner, R F; Luptacik, M; Sorger, G (eds), Optimization, Dynamics, and Economic Analysis, Physica-Verlag, Heidelberg, Germany, pp. 86-100.

Chiarella, C., He, X. & Pellizzari, P. 2012, 'A dynamic analysis of the microstructure of moving average rules in a double auction market', Macroeconomic Dynamics, vol. 16, no. 4, pp. 556-575.
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Inspired by the theoretically oriented dynamic analysis of moving average rules in the model of Chiarella, He, and Hommes (CHH) [Journal of Economic Dynamics and Control 30 (2006), 1729-1753], this paper conducts a dynamic analysis of a more realistic microstructure model of continuous double auctions in which the probability of heterogeneous agents trading is determined by the rules of either fundamentalists mean-reverting to the fundamental or chartists choosing moving average rules based on their relative performance. With such a realistic market microstructure, the model is able not only to obtain the results of the CHH model but also to characterize most of the stylized facts including volatility clustering, insignificant autocorrelations (ACs) of returns, and significant slowly decaying ACs of the absolute returns. The results seem to suggest that a comprehensive explanation of several statistical properties of returns is possible in a framework where both behavioral traits and realistic microstructure have a role

Chiarella, C., He, X., Huang, W. & Zheng, H. 2012, 'Estimating behavioural heterogeneity under regime switching', Journal of Economic Behavior & Organization, vol. 83, no. 3, pp. 446-460.
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Financial markets are typically characterized by high (low) price level and low (high) volatility during boom (bust) periods, suggesting that price and volatility tend to move together with different market conditions/states. By proposing a simple heterogeneous agent model of fundamentalists and chartists with Markov chain regime-dependent expectations and applying the S&P 500 data from January 2000 to June 2010, we show that the estimation of the model matches well with the boom and bust periods in the US stock market. In addition, we find evidence of time-varying behavioural heterogeneity within-group and that the model exhibits good forecasting accuracy.

He, X. & Shi, L. 2012, 'Boundedly rational equilibrium and risk premium', Accounting and Finance, vol. 52, no. 1, pp. 71-93.
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When people agree to disagree, the impact of the disagreement among agents on the market is the main concern of this paper. With the standard mean variance framework, this paper considers a market of two risky assets and two agents who have different preference and disagreement about the mean and variance/covariance of the asset returns. By constructing a consensus belief, the paper develops an concept of boundedly rational equilibrium (BRE) to characterize the market equilibrium and examines explicitly the impact of heterogeneity on the market equilibrium and risk premium when the disagreements among the two agents are mean preserved spreads of a benchmark homogeneous belief. It shows that, in market equilibrium, the biased mean preserved spreads in beliefs among the two agents have significant impact on the risk premium of the risky assets and market portfolio, and adding a riskless asset in the market magnifies the impact of the heterogeneity on the market. The results show that both optimism/pessemism and confidence/doubt can increase the market risk premium and reduce the riskfree rate.

He, X. & Shi, L. 2012, 'Disagreement in a multi-asset market', International Review of Finance, vol. 12, no. 3, pp. 357-373.
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This paper provides a simple framework to study the effect of disagreement in a multi-asset market equilibrium by considering two agents who disagree about expected returns, variances, and correlation of returns of two risky assets. When agents' subjective beliefs are characterized by mean preserving spreads of a benchmark homogeneous belief, we show that the effect of the disagreement does not cancel out in general and the effect in a multi-asset market can be very different from a single asset market. In particular, the market risk premium can increase and the risk-free rate can decrease significantly even when the market is overoptimistic and overconfident.

He, X. & Shi, L. 2012, 'Disagreement, correlation and asset prices', Economics Letters, vol. 116, no. 3, pp. 512-515.
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When people agree to disagree, how does the disagreement affect asset prices? Within an equilibrium framework with two agents, two risky assets and a riskless bond, we analyze the joint impact of disagreement about expected payoff, variance and correlation, and compare prices with benchmark prices in a market with homogeneous beliefs.

He, X. & Li, K. 2012, 'Heterogeneous beliefs and adaptivebehaviour in a continuous-time asset price model', Journal of Economic Dynamics and Control, vol. 36, no. 7, pp. 973-987.
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This paper extends the analysis of the seminal work of . Brock and Hommes (1997, 1998) on heterogeneous beliefs and rational routes to randomness in discrete-time models to a continuous-time model of asset pricing. The resulting model characterised mathematically by a system of stochastic delay differential equations provides a unified approach to deal with adaptive behaviour of heterogeneous agents and market stability impact of lagged price used by chartists to form their expectations. For the underlying deterministic model, we show not only that the result of Brock and Hommes on rational routes to market instability in discrete-time holds in continuous-time but also a double edged effect of an increase in lagged price used by the chartists on market stability. For the stochastic model, we demonstrate that the interaction and boundedly rational behaviour of heterogeneous agents can generate various market phenomena such as bubbles and crashes and replicate stylised facts including volatility clustering, and long range dependence in volatility.

Chiarella, C., He, X. & Zheng, M. 2011, 'An analysis of the effect of noise in a heterogeneous agent financial market model', Journal of Economic Dynamics and Control, vol. 35, no. 1, pp. 148-162.
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Heterogeneousagentmodels(HAMs)infinanceandeconomicsareoftencharacterised by highdimensionalnonlinearstochasticdifferentialordifferencesystems.Becauseof thecomplexityoftheinteractionbetweenthenonlinearitiesandnoise,acommonly used,oftencalledindirect,approachtothestudyofHAMscombinestheoreticalanalysis of theunderlyingdeterministicskeletonwithnumericalanalysisofthestochastic model.However,itiswellknownthatthisindirectapproachmaynotproperly characterisethenatureofthestochasticmodel.Thispaperaimstotacklethisissueby developingadirectandanalyticalapproachtotheanalysisofastochasticmodelof speculativepricedynamicsinvolvingtwotypesofagents,fundamentalistsand chartists,andthemarketpriceequilibriaofwhichcanbecharacterisedbythe stationarymeasuresofastochasticdynamicalsystem.Usingthestochasticmethodof averagingandstochasticbifurcationtheory,weshowthatthestochasticmodeldisplays behaviourconsistentwiththatoftheunderlyingdeterministicmodelwhenthetimelag in theformationofpricetrendsusedbythechartistsisfarawayfromzero.However, whenthislagapproacheszero,suchconsistencybreaksdown.

Chiarella, C., Dieci, R. & He, X. 2011, 'Do heterogeneous beliefs diversify market risk?', The European Journal of Finance, vol. 17, no. 3, pp. 241-258.
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It is believed that diversity is good for our society, but is it good for financial markets? In particular, does the diversity with respect to beliefs among investors reduce the market risk of risky assets? The current paper aims to answer this question.Within the standard mean+variance framework, we introduce heterogeneous beliefs not only in risk preferences and expected payoffs but also in variances/covariances. By aggregating heterogeneous beliefs into a market consensus belief, we obtain capital asset pricing model-like equilibrium price and return relationships under heterogeneous beliefs.We show that the market aggregate behaviour is in principle a weighted average of heterogeneous individual behaviours. The impact of heterogeneity on the market equilibrium price and risk premium is examined in general. In particular, we give a positive answer to the question in the title by considering some special structure in heterogeneous beliefs. In addition, we provide an explanation of Miller+s long-standing hypothesis on the relation between a stock+s risk and the divergence of opinions.

Chiarella, C., Dieci, R. & He, X. 2011, 'The dynamic behaviour of asset prices in disequilibrium: a survey', International Journal of Behavioural Accounting and Finance, vol. 2, no. 2, pp. 101-139.
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This article surveys boundedly rational heterogeneous agent (BRHA) models of financial markets. We give particular emphasis to the role of the market clearing mechanism used, the utility function of the investors, the interaction of price and wealth dynamics, and calibration of this class of models. Due to agents+ behavioural features and market noise, the BRHA class of models are both non-linear and stochastic. We show that BRHA models produce both a locally stable fundamental equilibrium corresponding to that of the standard paradigm, as well as instability with a consequent rich range of possible complex behaviours that are analysed by both simulation and deterministic bifurcation analysis. A calibrated model is able to reproduce quite well the stylised facts of financial markets. The BRHA framework seems able to better accommodate market features such as fat tails, volatility clustering, large excursions from the fundamental and bubbles than the standard financial market paradigm.

He, X. & Zheng, M. 2010, 'Dynamics of moving average rules in continuous-time financial market model', Journal of Economic Behavior & Organization, vol. 76, no. 3, pp. 615-634.
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Within a continuous-time framework, this paper proposes a stochastic heterogeneous agent model (HAM) of financial markets with time delays to unify various moving average rules used in discrete-time HAMs. The time delay represents a memory length of a moving average rule in discrete-time HAMs. Intuitive conditions for the stability of the fundamental price of the deterministic model in terms of agents´+¢ behavior parameters and memory length are obtained. It is found that an increase in memory length not only can destabilize the market price, resulting in oscillatory market price characterized by a Hopf bifurcation, but also can stabilize an otherwise unstable market price, leading to stability switching as the memory length increases. Numerical simulations show that the stochastic model is able to characterize long deviations of the market price from its fundamental price and excess volatility and generate most of the stylized facts observed in financial markets.

Cao, L. & He, X. 2009, 'Developing actionable trading agents', Knowledge And Information Systems, vol. 18, no. 2, pp. 183-192.
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Trading agents are useful for developing and back-testing quality trading strategies to support smart trading actions in the market. However, most of the existing trading agent research oversimplifies trading strategies, and focuses on simulated ones. As a result, there exists a big gap between the deliverables and business needs when the developed strategies are deployed into the real life. Therefore, the actionable capability of developed trading agents is often very limited. This paper for the first time introduces effective approaches for optimizing and integrating multiple classes of strategies through trading agent collaboration. An integration and optimization approach is proposed to identify optimal trading strategy in each category, and further integrate optimal strategies crossing classes. Positions associated with these optimal strategies are recommended for trading agents to take actions in the market. Extensive experiments on a large quantity of real-life market data show that trading agents following the recommended strategies have great potential to obtain high benefits while low costs. This verifies that it is promising to develop trading agents toward workable and satisfying business needs.

He, X., Li, K., Wei, J. & Zheng, M. 2009, 'Market stability switches in a continuous-time financial market with heterogeneous beliefs', Economic Modelling, vol. 26, no. 6, pp. 1432-1442.
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By considering a financial market of fundamentalists and trend followers in which the price trend of trend followers is formed as a weighted average of historical prices, we establish a continuous-time financial market model with time delay and examine the impact of time delay on market price dynamics. Conditions for the stability of the fundamental price in terms of agents' behavior parameters and time delay are obtained. In particular, it is found that an increase in time delay can not only destabilize the market price but also stabilize an otherwise unstable market price, leading to stability switching as delay increases. These interesting phenomena shed new light in understanding of mechanism on the market stability. When the fundamental price becomes unstable through Hopf bifurcations, sufficient conditions on the stability and global existence of the periodic solution are obtained.

Zheng, M., Wang, D. & He, X. 2009, 'Asymmetry of technical analysis and market price volatility', China Finance Review, vol. 61, no. 2, pp. 61-89.
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Zhu, M., Chiarella, C., He, X. & Wang, D. 2009, 'Does the market maker stabilize the market?', Physica A: Statistical Mechanics and its Applications, vol. 388, no. 15-16, pp. 3164-3180.
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The market maker plays an important role in price formation, but his/her behavior and stabilizing impact on the market are relatively unclear, in particular in speculative markets. This paper develops a financial market model that examines the impact on market stability of the market maker, who acts as both a liquidity provider and an active investor in a market consisting of two types of boundedly rational speculative investorsÔ++the fundamentalists and trend followers. We show that the market maker does not necessarily stabilize the market when he/she actively manages the inventory to maximize profits, and that rather the market makerÔ++s impact depends on the behavior of the speculators. Numerical simulations show that the model is able to generate outcomes for asset returns and market inventories that are consistent with empirical findings.

Chiarella, C., He, X., Wang, D. & Zheng, M. 2008, 'The Stochastic Bifurcation Behaviour of Speculative Financial Markets', Physica A: Statistical Mechanics and its Applications, vol. 387, no. 15, pp. 3837-3846.
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This paper establishes a continuous-time stochastic asset pricing model in a speculative financial market with fundamentalists and chartists by introducing a noisy fundamental price. By application of stochastic bifurcation theory, the limiting market equilibrium distribution is examined numerically. It is shown that speculative behaviour of chartists can cause the market price to display different forms of equilibrium distributions. In particular, when chartists are less active, there is a unique equilibrium distribution which is stable. However, when the chartists become more active, a new equilibrium distribution will be generated and become stable. The corresponding stationary density will change from a single peak to a crater-like density. The change of stationary distribution is characterized by a bimodal logarithm price distribution and fat tails. The paper demonstrates that stochastic bifurcation theory is a useful tool in providing insight into various types of financial market behaviour in a stochastic environment.

Gong, G., Gao, J. & He, X. 2008, 'Exchange Rate Regime and Monetary Policy: A Proposal for Small and Less Developed Economies', Jingji Yanjiu - Economic Research Journal, vol. 43, no. 6, pp. 25-36.
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He, X. & Li, Y. 2008, 'Heterogeneity, convergence and autocorrelations', Quantitative Finance, vol. 8, no. 1, pp. 59-79.
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This paper is a contribution to the literature on the explanatory power and calibration of heterogeneous asset pricing models. We set out a new stochastic market-fraction asset pricing model of fundamentalists and trend followers under a market maker. Our model explains key features of financial market behaviour such as market dominance, convergence to the fundamental price and under- and over-reaction. We use the dynamics of the underlying deterministic system to characterize these features and statistical properties, including convergence of the limiting distribution and autocorrelation structure. We confirm these properties using Monte Carlo simulations.

Chiarella, C., Dieci, R. & He, X. 2007, 'Heterogeneous Expectations and Speculative Behavior in a Dynamic Multi-Asset Framework', Journal of Economic Behavior and Organization, vol. 62, no. 3, pp. 408-427.
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This paper develops a dynamic model of a financial market where heterogeneous agents invest among multiple risky assets and a risk-free asset, under a market maker scenario. Particular attention is paid to the case of two risky assets and two agent types, fundamentalists and trend chasers, whose beliefs on both first and second moments of the conditional distribution of returns are based on past observations. Conditions for the stability of the fundamental equilibrium are established and the effect of the correlation between the risky assets is examined. It turns out that investors anticipated correlation and dynamic portfolio diversification do not always have a stabilizing role, but rather may act as a source of complexity in the financial market.

Corron, N., He, X. & Westerhoff, F.H. 2007, 'Butter Mountains, Milk Lakes and optimal Price Limiters', Applied Economic Letters, vol. 14, no. 15, pp. 1131-1136.
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It is known that simple price limiters may have unexpected consequences in irregular commodity price fluctuations between bull and bear markets and complicated impacts on the size of buffer stocks. In particular, imposing a lower price boundary may lead to a huge buffer stock, e.g. to a butter mountain or a milk lake and this is a real problem for regulators since storage costs may become impossible to finance over time. The relation between price limiters and the size of buffer stocks is nontrivial and there may exist some optimal price limiters which require only weak market interventions and thus provide a rather inexpensive option to regulate commodity markets. In this article, we use a simple commodity market model to explore the relation between price limiters and the average growth rate of the buffer stocks. It is found that these optimal price limiter levels are simply the minimum values of unstable periodic orbits of the underlying deterministic system.

He, X. & Li, Y. 2007, 'Power-Law Behaviour, Heterogeneity, and Trend Chasing', Journal of Economic Dynamics and Constrol, vol. 31, no. 10, pp. 3396-3426.
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Long-range dependence in volatility is one of the most prominent examples in financial market research involving universal power laws. Its characterization has recently spurred attempts to provide some explanations of the underlying mechanism. This paper contributes to this recent line of research by analyzing a simple market fraction asset pricing model with two types of traders - fundamentalists who trade on the price deviation from estimated fundamental value and trend followers whose conditional mean and variance of the trend are updated through a geometric learning process. Our analysis shows that agent heterogeneity, risk-adjusted trend chasing through the geometric learning process, and the interplay of noisy fundamental and demand processes and the underlying deterministic dynamics can be the source of power-law distributed fluctuations. In particular, the noisy demand plays an important role in the generation of insignificant autocorrelations (ACs) on returns, while the significant decaying AC patterns of the absolute returns and squared returns are more influenced by the noisy fundamental process. A statistical analysis based on Monte Carlo simulations is conducted to characterize the decay rate. Realistic estimates of the power-law decay indices and the (FI)GARCH parameters are presented. (C) 2007 Elsevier B.V. All rights reserved.

Chiarella, C., He, X. & Wang, D. 2006, 'A behavioral asset pricing model with a time-varying second moment', Chaos, Solitons and Fractals, vol. 29, no. 3, pp. 535-555.
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We develop a simple behavioral asset pricing model with fundamentalists and chartists in order to study price behavior in financial markets when chartists estimate both conditional mean and variance by using a weighted averaging process. Through a stabil

Chiarella, C., He, X. & Hommes, C. 2006, 'A dynamic analysis of moving average rules', Journal of Economic Dynamics and Control, vol. 30, no. 9-10, pp. 1729-1753.
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The use of various moving average (MA) rules remains popular with financial market practitioners. These rules have recently become the focus of a number empirical studies, but there have been very few studies of financial market models where some agents

Chiarella, C., He, X., Hung, H. & Zhu, P. 2006, 'An analysis of the cobweb model with boundedly rational heterogeneous producers', Journal of Economic Behavior & Organization, vol. 61, no. 4, pp. 750-768.
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This paper considers the traditional cobweb model with heterogenous risk averse producers whose supply functions involve their estimates of the conditional mean and variance of the future price. The producers seek to learn these quantities by applying geometric decay processes (GDP) to past prices. The heterogeneity manifests itself in the lag lengths and memory parameters applied to past prices as well as in risk aversion coefficients. We find that each dimension of heterogeneity changes/enriches the cobweb dynamics with respect to the case of homogeneous producers.

Chiarella, C., He, X. & Hommes, C. 2006, 'Moving average rules as a source of market instability', Physica A: Statistical Mechanics and its Applications, vol. 370, no. 1, pp. 12-17.
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Despite the pervasiveness of the efficient markets paradigm in the academic finance literature, the use of various moving average (MA) trading rules remains popular with financial market practitioners. This paper proposes a stochastic dynamic financial m

Dieci, R., Foroni, I., Gardini, L. & He, X. 2006, 'Market mood, adaptive beliefs and asset price dynamics', Chaos, Solitons and Fractals, vol. 29, no. 3, pp. 520-534.
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Empirical evidence has suggested that, facing different trading strategies and complicated decision, the proportions of agents relying on particular strategies may stay at constant level or vary over time. This paper presents a simple dynamic market frac

Bird, R.G., He, X., Thosar, S.B. & Woolley, P.K. 2005, 'The case for market inefficiency: investment style and market pricing', The Journal of Asset Management, vol. 5, no. 6, pp. 365-388.
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He, X. & Westerhoff, F.H. 2005, 'Commodity markets, price limiters and speculative price dynamics', Journal Of Economic Dynamics & Control, vol. 29, no. 9, pp. 1577-1596.
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We develop a behavioral commodity market model with consumers, producers and heterogeneous speculators to characterize the nature of commodity price fluctuations and to explore the effectiveness of price stabilization schemes. Within our model, we analyz

Chiarella, C. & He, X. 2003, 'Dynamics of beliefs and learning under aL processes - the heterogeneous case', Journal of Economics Dynamics and Control, vol. 27, no. 3, pp. 503-531.
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Chiarella, C. & He, X. 2003, 'Heterogeneous beliefs, risk, and learning in a simple asset-pricing model with a market maker', Macroeconomic Dynamics, vol. 7, no. 4, pp. 503-536.
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Chiarella, C. & He, X. 2002, 'Heterogeneous beliefs, risk and learning in a simple asset pricing model', Computational Economics, vol. 19, no. 1, pp. 95-132.
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Chiarella, C. & He, X. 2001, 'Asset Price & Wealth Dynamics Under Heterogeneous Expectations', Quantitative Finance, vol. 1, no. 5, pp. 509-526.
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Chiarella, C., Dieci, R., He, X. & Li, K. 2012, 'An evolutionary CAPM under heterogeneous beliefs', The 25th Australasian Finance and Banking Conference 2012, Sydney, Australia, December 2012 in Proceedings of the 25th Australasian Finance and Banking Conference 2012, ed Fariborz Moshirian et al, University of NSW, Sydney, Australia, pp. 1-38.