In this paper we consider a canonical stochastic overlapping generations economy with sequentially complete markets. We examine how aggregate and individual shocks translate to changes in the distribution of wealth and how these movements in the wealth distribution affect asset prices and the...

We examine the optimal allocation of assets in the portfolio of a Colombian homeowner conditional on various levels of the house value to net wealth ratio. The high rate of home ownership and low rates of investment in financial assets indicate that households allocate most of their wealth to...

Ambiguity aversion in dynamic models is motivated by the presence of unknown time-varying features, which agents do not understand and cannot theorize about. We analyze the consequences of this assumption for economic agents and model builders, who typically need to estimate a model, e.g., to...

Estimates of agents' risk aversion dier between market studies and experimental studies. We demonstrate that the estimates can be reconciled through consistent treatment of agents' tendency for narrow framing, regarding integration of background wealth as well as across risky outcomes: Risk...

In this paper we examine the effect of collateral requirements on the prices of long- lived assets. We consider a Lucas-style infinite-horizon exchange economy with hetero- geneous agents and collateral constraints. There are two trees in the economy which can be used as collateral for...

We perform a detailed asymptotic analysis of the equilibrium behavior of the asset prices, wealth size and portfolio weights in complete markets equilibria, with long-lived funds. In equilibrium, the fund with the (closest to) log preference will dominate the other funds in size, in the...

Agents with cognitive limitations may compute the expected value of a risky asset incorrectly. If market prices reflect the probabilities of the payoff-relevant states, agents who compute the probabilities incorrectly encounter a market price that is inconsistent with their calculation. We test...

We study the existence of equilibria with endogenously complete markets in a continuous-time, heterogenous agents economy driven by a multidimensional diffusion process. Our main results show that if prices are real analytic as functions of time and the state variables of the model then a suffi-...

We derive representations for the stock price drift and volatility in the equilibrium of agents with arbitrary, heterogeneous utility functions and with the aggregate dividend following an arbitrary Markov diffusion. We introduce a new, intrinsic characteristic of the aggregate dividend process...