This paper presents a simple rational expectations model of intertemporal asset pricing. It shows that heterogeneous risk aversion of investors is likely to generate declining aggregate relative risk aversion. This leads to predictability of asset returns and high and persistent volatility....

This paper presents a simple rational expectations model of intertemporal asset pricing. It shows that state-independent heterogeneous risk aversion of investors is likely to generate declining aggregate relative risk aversion. This leads to predictability of asset returns and high and...

A costless, fully revealing signalling equilibrium is derived from two easily understandable conditions. The outsidet-protection condition states that the outsiders relate the price which they offer to pay for a security inversely to the supply of this security which they interpret as a quality...

Die Vorstellung selbst-stabilisierender, zum Gleichgewicht tendierender Finanzmärkte, lange Zeit als Selbstverständlichkeit angesehen, ist durch die aktuelle Banken- und Kreditkrise in Frage gestellt. Trotz ausgefeilten Risikomanagements der Banken und einer an Basel II orientierten Aufsicht...