Equilibrium portfolios in the neoclassical growth model

This paper studies equilibrium portfolios in the traditional neoclassical growth model under uncertainty with heterogeneous agents and dynamically complete markets. Preferences are restricted to be quasi-homothetic. Heterogeneity across agents is due to two reasons. First, agents may have di¤erent shares of the representative ...rm at date 0. Secondly, agents may also have di¤erent preferences but only due to di¤erent minimum consumption requirements. Whenever this environment displays changing degrees of heterogeneity across agents, the trading strategy of ...xed portfolios cannot be optimal in equilibrium. This trading strategy is optimal in stationary endowment economies with dynamically complete markets. Very importantly, our framework can generate changing heterogeneity either if minimum consumption requirements are not zero or if labor income is not zero and the value of human wealth and non-human are linearly independent. Preliminary. Comments are welcome. JEL classi...cation: C61, D50, D90, E20, G11.