Abstract
This paper relates fluctuations in asset prices to stochastic arrival of agents with different discount factors. I show that even arbitrarily small and rare shocks could lead to an arbitrarily high average equity premium while average interest rates remain arbitrarily close to the average rate of productivity growth.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 203-207 |
| Number of pages | 5 |
| Journal | Economics Letters |
| Volume | 64 |
| Issue number | 2 |
| DOIs | |
| State | Published - Aug 1999 |
Funding
I would like to express my gratitude to Franklin Allen and George Mailath for many valuable suggestions. I would also like to thank Suleyman Basak, Boyan Jovanovic, Atsushi Kajii, Stephen Morris and Andrew Postlewaite for useful comments. Financial support from the National Science Foundation grant 9730385 is gratefully acknowledged. All errors are mine.
Keywords
- Asset prices
- G12
- Heterogeneous agents
- Wealth distribution
ASJC Scopus subject areas
- Finance
- Economics and Econometrics
