The attempt to match characteristics of asset pricing models such as the risk-free interest rate, equity premium and the Sharpe ratio for models with instantaneous consumption decisions in the context of stochastic growth models has not been very successful. Many recent versions of asset pricing...

Hansen and Jagannathan (1991) proposed a volatility bound for evaluating asset-pricing models that is a restriction on the volatility of a representative agentÌs intertemporal marginal rate of substitution (IMRS). We develop a generalization of their bound that (i) incorporates the serial...

Using standard preferences for asset pricing has not been very successful to match asset price characteristics such as the risk-free interest rate, equity premium and the Sharpe ratio to time series data. Behavioral finance has recently proposed more realistic preferences such as preferences...

This paper studies a financial market in which heterogeneous investors with multiperiod planning horizons of arbitrary finite length interact dynamically. Assumptions on individual preferences and subjective expectations are provided under which asset demand functions and market clearing prices...

We consider an infinite horizon exchange economy with incomplete markets and default. As in Geanakoplos and Zame (1998) financial securities are traded if the promises associated with them are backed by collateral. The only collateral available in our economy are shares of Lucas trees. We prove...