We study asset pricing with consumption frictions. Frictions in consumption include adjustment costs which prevent a consumer from adjusting consumption freely, due to transaction costs, commitments, search and learning costs, and psychological costs. The stochastic discount factor is determined...

We study a pure exchange economy with two groups of agents who exhibit different consumption patterns: one changes consumption immediately in response to shocks, but the other delays the response. We investigate the linkages among the consumption heterogeneity, business cycles, and asset returns...

In this paper we study a simple two-period asset pricing model to understand the implications of uninsurable labor income risk and/or borrowing constraints, limited stock market participation, heterogeneous labor income volatilities, and heterogeneous preferences. We appraise the performance of...