We propose an asset pricing model featuring both limited participation and heterogeneity, in which agents randomly participate in the bond and stock markets according to a probability that depends on their non-financial income. We develop an indirect inference method to estimate our model on...

We propose an asset pricing model featuring time-varying limited participation in both bond and stock markets and household heterogeneity. Households face idiosyncratic income risks but participate in financial markets with a certain probability that depends on their individual income and on...