  This paper examines a heterogeneous beliefs model in which there is a process
that is only partially observed by the agents. The economy contains a risky
asset producing dividends continuously in time. The dividends are observed by
the agents. The dividends are assumed to be a known function of some other
unobserved process. The agents use filtering to estimate the value of this
unobserved process. The agents have different beliefs about the dynamics of the
unobserved process and therefore form different estimates. We analyse this
model and derive the state price density. We use this to derive the riskless
rate. We also characterise the price of the risky asset in terms of the
solution of a series of differential equations.
