Existence and uniqueness of equilibrium in Lucas' asset pricing model when utility is unbounded

This note proves existence of a unique equilibrium in a Lucas (1978) economy when the utility function displays constant relative risk aversion and log dividends follow a normally distributed AR(1) process with positive auto-correlation. In particular, the note provides restrictions on the coefficient of relative risk aversion, the discount factor and the conditional variance of the consumption process that ensure existence of a unique equilibrium.

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Year of publication:	2015
Authors:	Brogueira, Joao ; Schuetze, Fabian
Institutions:	Department of Economics, European University Institute
Subject:	Asset pricing \| Exchange economy \| Dynamic programming \| Equilibrium conditions

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Series:	Economics Working Papers.
Type of publication:	Book / Working Paper
Notes:	The text is part of a series European University Institute Working Papers Number ECO2015/02
Classification:	C61 - Optimization Techniques; Programming Models; Dynamic Analysis ; C62 - Existence and Stability Conditions of Equilibrium ; D51 - Exchange and Production Economies ; G12 - Asset Pricing
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10011252964