This paper analyzes and computes the equilibria of economies with large numbers of heterogeneous agents who have different asset trading technologies, preferences and beliefs. We illustrate the value of our method by using it to evaluate the implications of these heterogeneities through several...

This paper analyzes and computes the equilibria of economies with large numbers of heterogeneous agents who have different asset trading technologies, preferences, and beliefs. We illustrate the value of our method by using it to evaluate the implications of these heterogeneities through several...

This paper extends the methodology developed in Chien, Cole and Lustig (2011 & 2012) (hereafter CCL2011 and CCL2012, respectively) to analyze and compute the equilibria of economies with heterogeneous agents who have different asset trading technologies and are subject to both aggregate and...

Our paper examines whether the failure of unsophisticated investors to rebalance their portfolios can help to explain the countercyclical volatility of aggregate risk compensation in financial markets. To answer this question, we set up a model in which a large mass of investors do not rebalance...

Our paper examines the impact of heterogeneous trading technologies for households on asset prices and the distribution of wealth. We distinguish between passive traders who hold fixed portfolios of stocks and bonds, and active traders who adjust their portfolios to changes in expected returns....

Our paper examines the impact of heterogeneous trading technologies for households on asset prices and the distribution of wealth. We distinguish between passive traders who hold fixed portfolios of stocks and bonds, and active traders who adjust their portfolios to changes in expected returns....

U.S. financial institutions have traditionally insured the typical U.S. household against persistent shocks to U.S. inflation through the U.S. mortgage market. The bond risk premium is effectively the price of long-run inflation risk insurance charged by these U.S. intermediaries. Starting in...

We introduce limited liability in a model with a continuum of ex ante identical agents who face aggregate and idiosyncratic income risk. These agents can trade a complete menu of contingent claims, but they cannot commit to honor their promises, and their shares in a Lucas tree serve as...

We introduce limited liability in a model with a continuum of ex ante identical agents who face aggregate and idiosyncratic income risk. These agents can trade a complete menu of contingent claims, but they cannot commit and shares in a Lucas tree serve as collateral to back up their...

Our paper examines whether the well-documented failure of unsophisticated investors to rebalance their portfolios can help to explain the enormous counter-cyclical volatility of aggregate risk compensation in financial markets. To answer this question, we set up a model in which CRRA-utility...