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| Author | : Günter Franke |
| Publisher | : |
| Total Pages | : 68 |
| Release | : 2003 |
| Genre | : Capital assets pricing model |
| ISBN | : |
| Author | : Günter Franke |
| Publisher | : |
| Total Pages | : 50 |
| Release | : 2001 |
| Genre | : |
| ISBN | : |
| Author | : Takeshi Yamada |
| Publisher | : |
| Total Pages | : 106 |
| Release | : 1993 |
| Genre | : Stockholders |
| ISBN | : |
| Author | : Nicolae Garleanu |
| Publisher | : |
| Total Pages | : 0 |
| Release | : 2020 |
| Genre | : |
| ISBN | : |
We develop a tractable asset-pricing framework characterized by imperfect risk sharing among cohorts, who experience different levels of integrated life-time endowments. While all asset-pricing implications stem from the heterogeneity of consumption among investors, cross-sectional measures of inequality are non-volatile, only weakly related to asset prices, and far more persistent than the price-to-dividend ratio. We show how to identify a marginal agent's consumption growth in this framework by utilizing cross-sectional information. Our proposed notion of marginal-agent consumption growth exhibits different and more volatile low-frequency variation than the aggregate consumption growth per capita, which is normally used in representative agent models. These low frequency movements in our measure of marginal agent consumption growth can explain a large portion of the low frequency movements in real interest rates and, when combined with recursive preferences, can account quantitatively for the stylized asset-pricing facts (high market price of risk, equity premium, volatility, and return predictability).
| Author | : Nicolae B. Gârleanu |
| Publisher | : |
| Total Pages | : 60 |
| Release | : 2020 |
| Genre | : Assets (Accounting) |
| ISBN | : |
We develop a tractable asset-pricing framework characterized by imperfect risk sharing among cohorts, who experience different levels of integrated life-time endowments. While all asset-pricing implications stem from the heterogeneity of consumption among investors, cross-sectional measures of inequality are non-volatile, only weakly related to asset prices, and far more persistent than the price-to-dividend ratio. We show how to identify a marginal agent's consumption growth in this framework by utilizing cross-sectional information. Our proposed notion of marginal-agent consumption growth exhibits different and more volatile low-frequency variation than the aggregate consumption growth per capita, which is normally used in representative agent models. These low frequency movements in our measure of marginal agent consumption growth can explain a large portion of the low frequency movements in real interest rates and, when combined with recursive preferences, can account quantitatively for the stylized asset-pricing facts (high market price of risk, equity premium, volatility, and return predictability).
| Author | : Frank Riedel |
| Publisher | : Springer Science & Business Media |
| Total Pages | : 119 |
| Release | : 2012-12-06 |
| Genre | : Business & Economics |
| ISBN | : 364257663X |
Real world investors differ in their tastes and attitudes and they do not have, in general, perfect information about the future prospects of the economy. Most theoretical models, however, assume to the contrary that investors are homogeneous and perfectly informed about the market. In this book, an attempt is made to overcome these shortcomings. In three different case studies, the effect of heterogeneous time preferences, heterogeneous beliefs and imperfect information about the economy's growth on the term structure of interest rates are studied. The initial chapter gives an introduction to the theory of financial markets in continuous time under imperfect information and establishes the existence of an equilibrium with complete markets.
| Author | : Andreas Fagereng |
| Publisher | : International Monetary Fund |
| Total Pages | : 69 |
| Release | : 2018-07-27 |
| Genre | : Business & Economics |
| ISBN | : 1484370066 |
We provide a systematic analysis of the properties of individual returns to wealth using twelve years of population data from Norway’s administrative tax records. We document a number of novel results. First, during our sample period individuals earn markedly different average returns on their financial assets (a standard deviation of 14%) and on their net worth (a standard deviation of 8%). Second, heterogeneity in returns does not arise merely from differences in the allocation of wealth between safe and risky assets: returns are heterogeneous even within asset classes. Third, returns are positively correlated with wealth: moving from the 10th to the 90th percentile of the financial wealth distribution increases the return by 3 percentage points - and by 17 percentage points when the same exercise is performed for the return to net worth. Fourth, wealth returns exhibit substantial persistence over time. We argue that while this persistence partly reflects stable differences in risk exposure and assets scale, it also reflects persistent heterogeneity in sophistication and financial information, as well as entrepreneurial talent. Finally, wealth returns are (mildly) correlated across generations. We discuss the implications of these findings for several strands of the wealth inequality debate.
| Author | : David Weinbaum |
| Publisher | : |
| Total Pages | : 34 |
| Release | : 2009 |
| Genre | : |
| ISBN | : |
We provide an explicit characterization of the equilibrium when investors have heterogeneous risk preferences. Given market completeness, investors can achieve full risk sharing. Thus a representative agent can be constructed, though this agent's risk aversion changes over time as the relative wealths of the individual investors change. We show that volatility depends on the covariance of aggregate risk aversion and stock returns. We find that heterogeneity increases volatility, produces volatility clustering (ARCH effects) and quot;leveragequot;-like effects. Option prices exhibit implied volatility skews. There is predictability and we assess the magnitude of investors' hedging demands and trading volume. Further, diversity is beneficial to all agents and entails welfare gains that can be substantial.
| Author | : Lei Shi |
| Publisher | : |
| Total Pages | : 40 |
| Release | : 2019 |
| Genre | : |
| ISBN | : |
We analyze the joint effect of borrowing and short-sale constraints in a dynamic economy populated by two constrained investors with heterogeneous risk aversions and beliefs. We find that equilibrium prices adjust in such a way that the constraints never simultaneously bind. When the constraints are tight, we observe a regime switch behavior (discontinuities) in the risk-free rate and market price of risk at a critical state, where two equilibria exist, i.e., either constraint can be binding. Stock return volatility is the lowest at the critical state. Imposing a ban on short-sales at the same time when access to credit is restrictive or tightening borrowing during a short-sale ban can potentially move the equilibrium away from the critical state, thus increase stock return volatility rather than reducing it.
| Author | : Bo Liu |
| Publisher | : |
| Total Pages | : 41 |
| Release | : 2019 |
| Genre | : |
| ISBN | : |
We present a production-based model in which agents have heterogeneous risk aversion and heterogeneous discount rates. When the less risk-averse agent is more impatient, the two types of agents can coexist for a long time. The heterogeneity in risk aversion and discount rate induces the wealth share of less risk averse agent to be procyclical, while it leads Tobin's q and the investment-capital ratio to be countercyclical. We also nd that the heterogeneity in risk aversion and discount rate leads to more efficient risk sharing and reduces the volatility of stock returns.
