Ehling, Paul; Heyerdahl-Larsen, Christian - 2014
. This paper studies stock market correlations in an equilibrium model with heterogeneous risk aversion. In the model …, preference heterogeneity causes countercyclical variations in the volatility of aggregate risk aversion. At times of high … volatility of aggregate risk aversion, which is a common factor in returns, we see high correlations. The calibrated model …