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 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 sufficient for the asset price to fall. We show that these conditions neither imply,...

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 examine a static one-risk-free-one-risky asset portfolio choice when the investor’s wellbeing 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 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...