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We derive representations for the stock price drift and volatility in theequilibrium of agents with arbitrary, heterogeneous utility functionsand with the aggregate dividend following an arbitrary Markov diffusion.We introduce a new, intrinsic characteristic of the aggregate dividendprocess that...
Persistent link: https://www.econbiz.de/10005868698
This article shows that, as long as agents are required to maintain positivewealth, the presence of portfolio constraints may give rise to asset pricingbubbles in equilibrium even if there are unconstrained agents in the economywho can benefit from the induced arbitrage opportunity. Furthermore,...
Persistent link: https://www.econbiz.de/10005868914
auction. This approach provides a complementary perspective on recent advances in the general equilibrium theory of endogenous … assets are traded at a price above fundamental value in the double auction. The equilibrium level of leverage also emerges in … the simulations of the double auction. …
Persistent link: https://www.econbiz.de/10013370101
The pricing kernel puzzle is the observation that the pricing kernelmight be increasing in some range of the market returns. This paperanalyzes the pricing kernel in a nancial market equilibrium. If mar-kets are complete and investors are risk-averse and have common andtrue beliefs, the pricing...
Persistent link: https://www.econbiz.de/10009305117
-frequency trading. We explain how IEX differs from traditional continuous double auction markets and present summary data on IEX … of the continuous double auction. The model predicts that IEX will generally improve price efficiency and lower …
Persistent link: https://www.econbiz.de/10012013811
This paper surveys the literature on the linkages between asset prices and macroeconomic outcomes. It focuses on three major questions. First, what are the basic theoretical linkages between asset prices and macroeconomic outcomes? Second, what is the empirical evidence supporting these...
Persistent link: https://www.econbiz.de/10012060200
This paper surveys the theoretical and empirical literature on the macroeconomic implications of financial imperfections. It focuses on two major channels through which financial imperfections can affect macroeconomic outcomes. The first channel, which operates through the demand side of finance...
Persistent link: https://www.econbiz.de/10012060201
This paper addresses the discussion between economic power and the power of politics with particular focus on financial markets. After general reflections about the economic basis of power, the paper discusses in a general equilibrium framework how financial innovations can lead to risk creation...
Persistent link: https://www.econbiz.de/10010316928
We prove a no-speculative-trade theorem under unawareness for the infinite case. This generalizes the result for the finite case by Heifetz, Meier, and Schipper (2013).
Persistent link: https://www.econbiz.de/10010318836
Two-sided market theory predicts that platforms may subsidize the participation of one type of agent by extracting surplus from another type to internalize indirect network externalities. However, few empirical studies exist to evaluate the impact of government intervention in these markets. We...
Persistent link: https://www.econbiz.de/10010292179