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Leverage / Tano Santos, Pietro Veronesi.
- Format:
- Book
- Author/Creator:
- Santos, Tano.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w22905.
- NBER working paper series no. w22905
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2016.
- Summary:
- Many stylized facts of leverage, trading, and asset prices obtain in a frictionless general equilibrium model that features agents' heterogeneity in endowments and time- varying risk preferences. Our model predicts that aggregate debt increases in expansions when asset prices are high, volatility is low, and levered households enjoy a "consumption boom." Our model is consistent with poorer households borrowing more and with intermediaries' leverage being a priced factor. In crises, levered households strongly delever by "fire selling" their risky assets as asset prices drop. Yet, as empirically observed, their debt-to-wealth ratios increase as higher discount rates make their wealth decline faster.
- Notes:
- Print version record
- December 2016.
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