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Complete and Incomplete Markets with Short-Sale Constraints
Giménez, Eduardo L. - 2001
This paper argues that the introduction of a short-sale constraint in the Arrow-Radner frameworkinvalidates standard definitions of complete and incomplete markets. In this constrained set-up,two threshold values with familiar properties arise.The case of a zero short-sale bound set on some...
Persistent link: https://www.econbiz.de/10010324858
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Advance Information and Consumption Insurance: Evidence from Panel Data
Pedroni, Marcelo; Singh, Swapnil; Stoltenberg, Christian - 2022
We investigate whether US households possess advance information about their future income and what this means for consumption insurance. Based on insights from a theoretical model, we propose a new test to detect advance information, which requires only panel data on consumption and income....
Persistent link: https://www.econbiz.de/10013356488
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Consumption Choices and Earnings Expectations: Empirical Evidence and Structural Estimation
Stoltenberg, Christian; Uhlendorff, Arne - 2022
In this paper, we document that households' consumption expenditures depend on their expected earnings – even after controlling for realized earnings and wealth. To explain this evidence, we develop and structurally estimate a standard-incomplete markets model in which rational households...
Persistent link: https://www.econbiz.de/10013356505
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Consumption Choices and Earnings Expectations: Empirical Evidence and Structural Estimation
Stoltenberg, Christian; Uhlendorff, Arne - 2023
In this paper, we document that households' consumption expenditures crucially depend on their expected earnings – even after controlling for realized earnings, wealth and time-invariant unobserved characteristics such as permanent income and over-confidence. To explain this evidence, we...
Persistent link: https://www.econbiz.de/10014321795
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More Hedging Instruments may destablize Markets
Brock, William; Hommes, Cars; Wagener, Florian - 2006
This paper formalizes the idea that more hedging instruments may destabilize markets when traders are heterogeneous and adapt their behavior according to experience based reinforcement learning. We investigate three different economic settings, a simple mean-variance asset pricing model, a...
Persistent link: https://www.econbiz.de/10010325451
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Reconciling Consumption Inequality with Income Inequality
Lepetyuk, Vadym; Stoltenberg, Christian A. - 2013
The rise in within-group consumption inequality in response to the increase in within-group income inequality over the last three decades in the U.S. is puzzling to expected-utility-based incomplete market models. The two-sided lack of commitment models exhibit too little consumption inequality...
Persistent link: https://www.econbiz.de/10010326370
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On Positive Value of Information in Risk Sharing
Denderski, Piotr; Stoltenberg, Christian - 2015
We develop a novel argument why better public information can help countries to insure against idiosyncratic risk. Representative agents of developing and industrial countries receive public and private signals on their future income realization and engage in risk-sharing contracts with limited...
Persistent link: https://www.econbiz.de/10011288423
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Borrowing constraints, housing tenure choice and buy-to-let investors: An assignment model
Rouwendal, Jan; Sniekers, Florian; Jia, Ning - 2023
constraints result in profitable arbitrage possibilities for buy-to-let investors. They can buy houses that are preferred by …
Persistent link: https://www.econbiz.de/10014321778
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One-Way Arbitrage-Based Interest Parity
Chang, Rosita P.; Lee, Sang-Hyop; Reid, Sean F.; Rhee, … - 2002
forwardforeign exchange prices from interest parity forward prices. Second, the role oftransaction costs in one-way arbitrage …-based interest parity has not been examined.Applying the Fletcher and Taylor approach to one-way arbitrage-based interest parity … implied by one-way arbitrage, does not diminish therole of transaction costs; (ii) the varjances of the estimated deviations …
Persistent link: https://www.econbiz.de/10010324946
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SETS, Arbitrage Activity, and Stock Price Dynamics
Taylor, Nick; van Dijk, Dick; Franses, Philip Hans; … - 1999
This paper provides an empirical description of the relationshipbetween the trading system operated by a stockexchange and the transaction costs faced by heterogeneous investors who use the exchange. Therecent introduction ofSETS in the London Stock Exchange provides an excellent opportunity...
Persistent link: https://www.econbiz.de/10010324378