On the dynamics of asset prices and portfolios in a multiperiod CAPM

We present a numerical case study of the dynamics of a financial market in which heterogeneous investors described by linear mean–variance preferences and multiperiod planning horizons interact. The focus is on the induced price, portfolio, and wealth processes as well as on the transaction volume. Numerical evidence is provided that multiperiod planning horizons are a natural source of empirically observed clustered volatility and that heterogeneous planning horizons may amplify booms and busts.