In this paper, we study the relationship between income inequality and stock market returns. We develop a quantitative general equilibrium model that links shifts in both labour and capital income inequality to stock market variables. An increase of the share of capital owners' income from risky...

The paper studies the impact of a securities transaction tax (STT) on financial trading, stock prices and real economic variables in a closed-economy dynamic stochastic general-equilibrium model featuring financial frictions. The model incorporates channels by which 'noise trading' affects real...

The rest of the paper is organized as follows. The next section relates our work to the existing literature. In the following section some characteristics of the Prospect Theory are displayed. Then the setting of the model is explained and the first order conditions derived. The calibration...