This paper analyzes the expected life-time utility and the hedging demands in an exchange only, representative agent general equilibrium under incomplete information. We derive an expression for the investor's expected life-time utility, and analyze his hedging demands for intertemporal changes...

This paper analyzes the term structure of interest rates in an exchange-only Lucas (1978) economy where consumers learn about a stochastic growth rate through observations of the endowment process and an external public signal. We allow for deluded consumers, who exaggerate the degree of...

Based on a screening model, we hypothesize that borrower risk will be over- (under-)priced in recessions (booms), and the loan spreads' sensitivity to default risk as a function of economic growth will be inverse U-shaped. We test this prediction using a sample of 5,300 U.S. commercial loans...

In contrast to the efficient-market hypothesis (EMH), the noisy-market hypothesis (NMH) asserts that prices are but noisy indications of fundamental values. We study losses in certainty equivalents of investing according to one hypothesis (NMH or EMH) when the other is true. Our findings suggest...

Using a large cross-section of international household-level data, we explore the relation between institutional quality, households' level of trust and stock-market participation. We find that institutional quality has a significant impact on both trust and stock-market participation. We also...