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Portfolio Rebalancing in General Equilibrium / Miles S. Kimball, Matthew D. Shapiro, Tyler Shumway, Jing Zhang.
- Format:
- Book
- Author/Creator:
- Kimball, Miles S.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w24722.
- NBER working paper series no. w24722
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2018.
- Summary:
- This paper develops an overlapping generations model of optimal rebalancing where agents differ in age and risk tolerance. Equilibrium rebalancing is driven by a leverage effect that influences levered and unlevered agents in opposite directions, an aggregate risk tolerance effect that depends on the distribution of wealth, and an intertemporal hedging effect. After a negative macroeconomic shock, relatively risk tolerant investors sell risky assets while more risk averse investors buy them. Owing to interactions of leverage and changing wealth, however, all agents have higher exposure to aggregate risk after a negative macroeconomic shock and lower exposure after a positive shock.
- Notes:
- Print version record
- June 2018.
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