This paper studies the link between group-specific consumption growth and volatility within a framework of heterogeneous agents, under the assumption of a consumption externality. Household preferences are related to the volatility through asset holding decisions: volatility decreases with...

This paper studies the link between group-specic consumption growth and volatility within a framework of heterogeneous agents, under the assumption of a consumption externality. Household preferences are related to the volatility through asset holding decisions: volatility decreases with groups'...