We consider an exchange economy with heterogeneous agents and multiple assets and investigate the coupled dynamics of assets' prices and agents' wealth. We assume that agents have heterogeneous beliefs and invest on each asset a fraction of wealth proportional to its expected dividends. Our main...

What determines wealth inequality and mobility and how can the policy maker influence it? This paper quantifies in closed form the bottom and the top (Pareto) tail of the distribution in a continuous-time heterogeneous agent model. Financial market imperfections play a key role, for which...

This paper suggests using portfolio management methods in policy planning models as a practical tool for determining optimal policy under model parameter uncertainty. We suggest that in addition to calculating the standard policy return estimates, policy options should also be analyzed from the...

This paper investigates asset trade in a general-equilibrium complete-markets endowment economy with heterogeneous agents. It shows that standard no-trade results cease to hold when agents have heterogeneous beliefs and that substantial trade volume is generated, even in the presence of a...

In the last few years, regulating agencies of many countries, following recommendations of the Basel Committee on Banking Supervision, have compelled financial institutions to maintain minimum capital requirements to cover market and credit risks. The capital charge to cover market risk is a...

This paper studies the term structure implications of a simple structural economy in which the representative agent displays ambiguity aversion, modeled by Multiple Priors Recursive Utility. Bond excess returns reflect a premium for ambiguity, which is observationally distinct from the risk...

The author investigates the welfare cost of business cycles in an economy where households have heterogeneous trading technologies. In an economy with aggregate risk, the different portfolio choices induced by heterogeneous trading technologies lead to a larger consumption inequality in...

We study the impact of liquidity in optimal portfolio choice under leveraging to improve risk-adjusted and absolute returns. We consider a quasi-elastic market with continuous trading where temporary liquidity costs are sufficiently large relative to permanent impact. We show analytically that...

The aim of this paper is to investigate long-term portfolio management in a fully structural macro- financial framework. First, we estimate a Dynamic Stochastic General Equilibrium (DSGE) model that describes the dynamic of the US economy and financial markets. In addition to the typical...

In this paper I build a continuous time model of a complete financial market with $N$ heterogeneous agents whose constant relative risk aversion (CRRA) preferences differ in their level of risk aversion. I find that preference heterogeneity is able to replicate a high market price of risk and a...