This paper studies the capital accumulation and welfare implications of reducing capital income taxation in a general equilibrium economy with uninsurable investment risks. It has been shown that, with uninsurable investment risks, under-accumulation of capital may result compared to the...

Financial markets enable risk sharing and efficient allocation of capital. We characterize how these roles interact in a “feedback effects” model with diversely informed, risk-averse investors and a manager who learns from prices when making an investment decision. While learning from prices...