Heterogeneous Households under Uncertainty / Pietro Veronesi.

Format:

Book

Author/Creator:

Veronesi, Pietro.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w25448.

NBER working paper series no. w25448

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2019.

Summary:

I characterize a dynamic economy under general distributions of households' risk tolerance, endowments, and beliefs about long-term growth. As the economy expands and the stock market rises (a) the fraction of households with declining consumption-share increases; (b) the wealth-share of high risk-tolerant households increases; (c) richer households' wealth display a higher CAPM beta; and (d) households' portfolios change qualitatively. A log-utility investor for instance borrows in contractions but lends in expansions. Variations in uncertainty and expected growth generate trading volume due to risk sharing. Higher uncertainty increases stock prices, risk premiums, volatility, wealth inequality and the dispersion of portfolio holdings, consistently with the events in the late 1990s.

Notes:

Print version record

January 2019.