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Correlations of equity securities have varied substantially over time and remain a source of continuing policy debate. This paper studies stock market correlations in an equilibrium model with heterogeneous risk aversion. In the model, preference heterogeneity causes countercyclical variations...
Persistent link: https://www.econbiz.de/10010862257
the long run mean and/or the persistence of expected inflation.
Persistent link: https://www.econbiz.de/10010554316
We analyze the performance of irrational investors, who mistake expected returns of assets in a multi-asset economy. Mistakes by probabilistically unsophisticated investors that a priori seem small lead to severe underperformance compared with rational investors, under general conditions. Our...
Persistent link: https://www.econbiz.de/10010683025
Correlations of equity securities have varied substantially over time and remain a source of continuing policy debate. This paper studies stock market correlations in an equilibrium model with heterogeneous risk aversion. In the model, preference heterogeneity causes countercyclical variations...
Persistent link: https://www.econbiz.de/10012711500
We investigate conditions for endogenous incompleteness and completeness in continuous-time financial markets driven by diffusion processes with multiple consumption goods and heterogeneous agents. We show that for a class of utility functions the financial market is endogenously incomplete. A...
Persistent link: https://www.econbiz.de/10012707681