Asset Pricing with Idiosyncratic Risk and Overlapping Generations

Asset Bubbles and Overlapping Generations

International Asset Pricing under Habit Formation and Idiosyncratic Consumption Risk

This paper presents a consumption-based asset pricing model to explain the equity premium and riskfree puzzles as well as the predictability of returns in the international equity markets. We find that because the model entails idiosyncratic consumption risk which is higher than the aggregate consumption risk, the model helps lower the investor risk aversion needed to explain the mean equity pr...

Indeterminacy and Asset Price Volatility in Stochastic Overlapping Generations Models∗

This paper addresses the e ects of indeterminacy on the volatility of asset prices in a stochastic overlapping generations model with 3-period lived agents. With complete markets, indeterminacy is characterized by the initial conditions and all equilibria converge to one of the deterministic steady states in the long run. With incomplete markets, the degree of indeterminacy is countably innite....

Consumption-Based Asset Pricing with Recursive Utility

In this paper it has been attempted to investigate the capability of the consumption-based capital asset pricing model (CCAPM), using the general method of moment (GMM), with regard to the Epstien-zin recursive preferences model for Iran's capital market. Generally speaking, recursive utility permits disentangling of the two psychologically separate concepts of risk aversion and elasticity of i...

Asset Demands of Heterogeneous Consumers with Uninsurable Idiosyncratic Risk

We examine asset market equilibrium in an intertemporal economic model with individual and aggregate uncertainty and where the asset market is incomplete. Modigliani-Miller leverage irrelevance holds, even when consumers face borrowing constraints, because individual firms cannot alter the equilibrium portfolio of securities available to consumers. We show that households demand less risky port...