We extend Kyle's (1985) model of insider trading to the case where liquidity provided by noise traders follows a …

Can public insurance through redistributive income taxation improve the allocation of risk in an economy in which … private risk sharing is limited? The answer depends crucially on the fundamental friction that limits private risk sharing in … the first place. If risk sharing is incomplete because some insurance markets are missing for model-exogenous reasons (as …

, liquidity, and asset prices. Arbitrageurs exploit price discrepancies between assets traded in segmented markets, and in doing … so provide liquidity to investors. A collateral constraint limits their positions as a function of capital. We show that … markets, liquidity in each market generally becomes less volatile, but the reverse may hold for aggregate liquidity because of …

estimated model fits well the cross-sectional moments of household consumption growth and the unconditional moments of the risk … evidence, the model-implied risk-free rate and price-dividend ratio are pro-cyclical while the market return has …

We evaluate the asset pricing implications of a class of models in which risk sharing is imperfect because of limited … pricing aggregate risk. We find that for high values of the relative risk aversion coefficient, the limited enforcement … pricing kernel generates a market price of risk that is substantially closer to the data than the one obtained using the …

This essay reviews the family of models that seek to provide aggregate risk based explanations for the empirically …

paper shows that if traders are risk-neutral price takers with heterogenous beliefs, the price of a contract in a prediction …