We discover that letting agents pairwise sequentially exchange at "wrong" prices has a robust effect on prices at convergence. If the initial relative price for a good is cheaper than the equilibrium walrasian price due to initial endowments, the initial excess demand effect pushes resource...

This paper studies asset pricing wherein the model combines dynamic learning and habit formation with agents' heterogeneous beliefs and preferences in a dynamic, stochastic, general-equilibrium, pure-exchange, international Lucas orchard. The intertemporal equilibrium model considers two groups...

We study an equilibrium asset pricing model with several Lucas (1978) trees subject to persistent distress events, where the agent has incomplete information about the state of an underlying common factor and learns from the events occurring to each tree. Contrary to similar asset pricing models...

We study a simple static economy with collateralized loan contracts and an incomplete asset market. We study whether economic forces operate to keep asset price equal to fundamentals in this economy. We find that asset prices may be higher than the valuation of any agent in the economy, i.e.,...

In this paper, we propose an innovative VIX model which takes future market information available to the traders into account. The future information is modeled by an initially enlarged filtration in our setup. We derive an explicit representation for the anticipative VIX process and obtain the...

In this paper we study the impact of the degree of concentration of a financial system on the aggregate demand for housing as well as the feedback effect of the size of the mortgage loan market on lenders' profits, internal capital accumulation, loan losses and potential bailouts. In a general...

We show that cross-border financial flows arise when countries differ in their abilities to use assets as collateral. Financial integration is a way of sharing scarce collateral. The ability of one country to leverage and tranche assets provides attractive financial contracts to investors in the...

Rational bubbles in stocks can cause increases in trading volume, even after accounting for their expansionary effect on output and consumption. Trading volume increases are not caused by speculation driven by differences in beliefs. Dividend-bearing assets used to transfer resources...

We present evidence that shocks to household consumption growth are negatively skewed, persistent, countercyclical, and drive asset prices. We construct a parsimonious model where heterogeneous households have recursive preferences. A single state variable drives the conditional cross-sectional...

The appropriate design of monetary policy in integrated financial markets is one of the most challenging areas for central banks. One hot topic is whether the increase in liquidity has contributed to the formation of price bubbles in asset markets in the years preceding the financial crisis. If...