This paper challenges the widespread belief that competitive markets favor entrepreneurs who operate efficient technologies. In the context of a dynamically incomplete markets model, I show that, ceteris paribus, entrepreneurs operating efficient technologies can be driven out of a competitive...

The sign of the relationship between expected stock market returns and volatility appears to vary over time; a result that seems at odds with basic notions of risk and return. In this paper we construct an economy where production involves the use of both labor and capital as inputs. We show that...

This paper analyzes investment decisions and share trade when the owners of a firm are not unanimous. We use a one-period model with one firm, two owners and incomplete financial markets. The investment decision is assumed to be made by the majority owner. We study the effects shareholder...

Recent empirical evidence has suggested a positive association between various measures of investor protection and financial markets' development, and between financial markets' development and economic growth. We introduce investor protection in a simple extension of the two-period overlapping...

Under the assumption that asset markets are incomplete, this paper introduces bankruptcy in an intertemporal heterogeneous agent model with capital accumulation and heterogeneous agents. It explores the role of regulatory intervention and argues that intervention in the form of a level of...

In the early stages of the process of industry evolution, firms are financially constrained and might pay different wages if workers have heterogeneous expectations about the prospects for advancement offered by each firm's job ladder. This paper argues that, nevertheless, if the output market...

Macroeconomic models with heterogeneous agents and incomplete markets (e.g. Krusell and Smith, 1998) usually assume that consumers, rather than firms, own and accumulate physical capital. This assumption, while convenient, is without loss of generality only if the asset market is complete. When...

This paper considers a class of growth models with idiosyncratic human capital risk and private information about individual effort choices (moral hazard). Households are infinitely-lived and have preferences that allow for a time-additive expected utility representation with a one-period...

This paper introduces endogenous preference evolution into a Lucas-type economy and explores its consequences for investors' trading strategy and the dynamics of asset prices. In equilibrium, investors herd and hold the same portfolio of risky assets which is biased toward stocks of sectors that...

We develop a model that reproduces the return and volatility spread between sin and non-sin stocks, where investors trade off dividends with the ethical assessment of companies. We relax the assumption of boycott behaviour and investigate the role played by the dividend share of sin stocks on...