Suppose that a group of agents having divergent expectations can share risks efficiently. We examine how this group should behave collectively to manage these risks. We show that the beliefs of the representative agent is in general a function of the group's wealth level, or equivalently, that...

We explore the various arguments for and against the recommendation that younger households should invest a larger share of their pension wealth in risky assets. The ability of young agents to compensate their financial losses by saving more during their career provides the strongest argument in...

The ability to share risk efficiently in the economy is essential to welfare and growth. However, the increased frequency of natural catastrophes over the last decade has raised once again questions associated to the limits of insurability in a free-market economy, and to the relevance of public...

We examine a static one-risk-free-one-risky asset portfolio choice when the investor's well-being is affected by the anticipatory feelings associated to potential capital gains and losses. These feelings can be manipulated by the choice of subjective beliefs on the distribution of returns....

We examine the investment decision problem of a group whose members have heterogeneous time preferences. In particular, they have different discount factors for utility, possibly not exponential. We characterize the properties of efficient allocations of resources and of shadow prices that would...

We examine asset prices in a representative-agent model of general equilibrium. Assuming only that individuals are risk averse, we determine conditions on the changes in asset risk that are both necessary and sufficientfor the asset price to fall. We show that these conditions neither imply, nor...