Aggregation, Liquidity, and Asset Prices with Incomplete Markets / Sebastian Di Tella, Benjamin M. Hébert, Pablo Kurlat.

Author
Di Tella, Sebastian [Browse]
Format
Book
Language
English
Published/​Created
Cambridge, Mass. National Bureau of Economic Research 2024.
Description
1 online resource: illustrations (black and white);

Details

Series
  • Working Paper Series (National Bureau of Economic Research) no. w32268. [More in this series]
  • NBER working paper series no. w32268
Summary note
We analytically characterize asset-pricing and consumption behavior in two-account heterogeneous-agent models with aggregate risk. We show that trading frictions can simultaneously explain (1) household-level consumption behavior such as high marginal propensities to consume, (2) a zero-beta rate on equities that satisfies an aggregate consumption Euler equation, (3) a return on safe assets that does not, and (4) a flat securities market line. The return of equities is well explained by aggregate consumption, while the return of safe assets reflects a large and volatile liquidity premium.
Notes
March 2024.
Source of description
Print version record
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