Updating Wealth in an Asset Pricing Model with Heterogeneous Agents

Figure 2

(a) Diagram of the state variable 𝑤_𝑡 with respect to 𝑎 for the initial condition 𝑥₀≥1, 𝑚₀=−1 and 𝑤₀=1 and parameter values 𝛼=0.5, 𝜆=1, 𝜎²=1, 𝑟=0.02, 𝐶=0.5. We ignore the first 1000 iterations and we plot the following 5000 values of 𝑤_𝑡 for each value of 𝑎. (b) Trajectory of the state variable 𝑤_𝑡 versus time. We consider 𝑎=0.3 and we plot the first 20000 iterations.

(a)

(b)