Lower skill of the active management industry can imply greater fee revenue, value added, and investor performance. Such outcomes arise in a competitive equilibrium in which portfolio choices of active managers partially echo those of noise traders and also contain manager-specific noise. Both...

This paper is about the effectiveness of qualitative easing, a form of unconventional monetary policy that changes the risk composition of the central bank balance sheet with the goal of stabilizing economic activity. We construct a general equilibrium model where agents have rational...

We show that including distribution costs into a general equilibrium model of international portfolio choice contributes to explaining the 'home bias' in international equity investment. Our model is able to replicate observed investment positions for a wide range of parameter values, even if...

We study an overlapping-generations model to endogenize the size and structure of the market for delegated trading. Young investors who are not sure about their abilities choose between trading on their own and delegating trading to financial institutions. Individual investors who delegate...

Satisfaction of either of the independence axiom, or its less stringent counterpart, `smoothness of utility functions' is necessary condition for robustness of applications of expected utility theory to modeling of recurring choice. This study arrives at a general equilibrium mathematical...

Typically, models of stock prices or returns assume homogeneity of risk preference parameters. This study shows modeling of IPO prices necessarily is with reference to the distribution of risk preference parameters that already are represented in secondary equity markets. Modeling of stock...

We study a risk-sharing economy where an arbitrary number of heterogenous agents trades an arbitrary number of risky assets subject to quadratic transaction costs. For linear state dynamics, the forward-backward stochastic differential equations characterizing equilibrium asset prices and...

The choice of financing public expenditure with taxes or debt (or both) have been widely investigated by the literature, without finding an ultimate solution. In this article, we take a different point of view and compute the dynamics of the optimal debt/GDP ratio to study under which conditions...

We show that capital income inequality is large and growing fast, accounting for a significant portion of total income inequality. We study its determinants in a general equilibrium portfolio choice model with endogenous information acquisition and heterogeneity across household sophistication...

I develop a highly tractable dynamic general equilibrium model with collateralized lending and securitization in which asset-backed securities (ABS) function as a mechanism for risk sharing. Entrepreneurs who face aggregate and idiosyncratic investment risks can borrow from a menu of...