Abstract
An asset pricing formula is derived under an economic model incorporating investors’ heterogeneous beliefs. Applying this pricing formula, the autocorrelation of the asset returns is computed. An analysis of the autocorrelation reveals the influence of agents’ heterogeneous beliefs on asset price efficiency. Using the dataset coming from the Weighted Index of the Taiwan Stock Exchange, we test whether the heterogeneous beliefs between the institutional investors in the Taiwan stock market have a significant effect on price efficiency.
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