The Impact of Investor Heterogeneity on Asset Pricing Models: A Reconstruction Incorporating Risk Preferences, Information Acquisition, and Investment Experience

Beibei Chen

doi:10.47297/wspceWSP2516-251920.20250902

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The Impact of Investor Heterogeneity on Asset Pricing Models: A Reconstruction Incorporating Risk Preferences, Information Acquisition, and Investment Experience

Volume 9, Issue 2

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The Impact of Investor Heterogeneity on Asset Pricing Models: A Reconstruction Incorporating Risk Preferences, Information Acquisition, and Investment Experience
The Impact of Investor Heterogeneity on Asset Pricing Models: A Reconstruction Incorporating Risk Preferences, Information Acquisition, and Investment Experience
Beijing Jiaotong University, Beijing, China, 100044
Vol. 9, Issue 2, Pages: 117-121(2025)
Published：28 April 2025
DOI：10.47297/wspceWSP2516-251920.20250902
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Chen Beibei.The Impact of Investor Heterogeneity on Asset Pricing Models: A Reconstruction Incorporating Risk Preferences, Information Acquisition, and Investment Experience[J].Creative Economy,2025,09(02):117-121.
DOI：

Chen Beibei.The Impact of Investor Heterogeneity on Asset Pricing Models: A Reconstruction Incorporating Risk Preferences, Information Acquisition, and Investment Experience[J].Creative Economy,2025,09(02):117-121. DOI： 10.47297/wspceWSP2516-251920.20250902.

摘要

Abstract

The Capital Asset Pricing Model (CAPM) has been a foundational framework in finance

offering a method for estimating asset returns based on market risk. However

the traditional CAPM assumes investor homogeneity

disregarding differences in risk preferences

access to information

and investment experience. This paper addresses the limitations of CAPM by incorporating investor heterogeneity into asset pricing models

proposing an extended framework that accounts for risk preferences

information acquisition

and investment experience. The study suggests that varying levels of investor risk aversion

access to information

and experience significantly influence asset pricing and market behavior. Acknowledging these factors provides a more accurate and nuanced reflection of real-world markets

where investors are not homogeneous. The proposed model demonstrates enhanced explanatory andpredictive power regarding asset returns

improving resource allocation and investment decisions. Furthermore

the model offers insights for financial professionals

such as portfolio managers and financial advisors

by enabling more personalized investment strategies tailored to individual investor characteristics. This research challenges the assumptions of the traditional CAPM and presents a more comprehensive framework that could lead to more efficient market outcomes and optimized asset pricing.

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Keywords

references

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