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Aggregation, Liquidity, and Asset Prices with Incomplete Markets / Sebastian Di Tella, Benjamin M. Hébert, Pablo Kurlat.
- Format:
- Book
- Author/Creator:
- Di Tella, Sebastian.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w32268.
- NBER working paper series no. w32268
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2024.
- Summary:
- 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:
- Print version record
- March 2024.
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