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Building on a prominent agent-based model, we present a new structuralstochastic volatility asset pricing model of fundamentalists vs. chartistswhere the prices are determined based on excess demand. Specifically, thisallows for modelling stochastic interactions between agents, based on a herdingprocess corrected by a price misalignment, and incorporating strong noisecomponents in the agents' demand. The model's parameters are estimated usingthe method of simulated moments, where the moments reflect the basic propertiesof the daily returns of a stock market index. In addition, for the first timewe apply a (parametric) bootstrap method in a setting where the switchingbetween strategies is modelled using a discrete choice approach. As wedemonstrate, the resulting dynamics replicate a rich set of the stylized factsof the daily financial data including: heavy tails, volatility clustering, longmemory in absolute returns, as well as the absence of autocorrelation in rawreturns, volatility-volume correlations, aggregate Gaussianity, concave priceimpact and extreme price events.

A new structural stochastic volatility model of asset pricing and its stylized facts