We study a pure exchange economy under incomplete markets where households have heterogeneous homothetic recursive preferences and lending and borrowing are precluded. We fully characterize the properties of the efficient allocations and the equilibrium asset price. The ownership distribution...

Empirical studies of household portfolios show that young households, with little financial wealth, hold underdiversified portfolios that are concentrated in a small number of assets, a fact often attributed to behavioral biases. We present a potential rational alternative: we show that...

Household portfolio empirical studies have shown that young and relatively poor households hold under-diversified portfolios that are concentrated in a small number of assets, a fact often attributed to various behavioral biases. We present a model that offers a rational potential alternative:...

Empirical Studies of household portfolios have shown that young and relatively poor households hold under-diversified portfolios that are concentrated in a small number of assets, a fact often attributed to various behavioral biases. We present a model in which relatively poor investors, i.e.,...