Asset prices in general equilibrium with recursive utility and illiquidity induced by transactions costs : [Version 15 February 2014]
- In this paper, we study the effect of proportional transaction costs on consumption-portfolio decisions and asset prices in a dynamic general equilibrium economy with a financial market that has a single-period bond and two risky stocks, one of which incurs the transaction cost. Our model has multiple investors with stochastic labor income, heterogeneous beliefs, and heterogeneous Epstein-Zin-Weil utility functions. The transaction cost gives rise to endogenous variations in liquidity. We show how equilibrium in this incomplete-markets economy can be characterized and solved for in a recursive fashion. We have three main findings. One, costs for trading a stock lead to a substantial reduction in the trading volume of that stock, but have only a small effect on the trading volume of the other stock and the bond. Two, even in the presence of stochastic labor income and heterogeneous beliefs, transaction costs have only a small effect on the consumption decisions of investors, and hence, on equity risk premia and the liquidity premium. Three, the effects of transaction costs on quantities such as the liquidity premium are overestimated in partial equilibrium relative to general equilibrium.
Verfasserangaben: | Adrian Buss, Raman Uppal, Grigory Vilkov |
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URN: | urn:nbn:de:hebis:30:3-331519 |
URL: | http://ssrn.com/abstract=2397083 |
DOI: | https://doi.org/10.2139/ssrn.2397083 |
Titel des übergeordneten Werkes (Deutsch): | SAFE working paper series ; No. 41 |
Schriftenreihe (Bandnummer): | SAFE working paper (41) |
Verlag: | SAFE |
Verlagsort: | Frankfurt am Main |
Dokumentart: | Arbeitspapier |
Sprache: | Englisch |
Jahr der Fertigstellung: | 2014 |
Jahr der Erstveröffentlichung: | 2014 |
Veröffentlichende Institution: | Universitätsbibliothek Johann Christian Senckenberg |
Datum der Freischaltung: | 04.03.2014 |
Freies Schlagwort / Tag: | heterogeneous agents; incomplete markets; liquidity premium; portfolio choice |
Ausgabe / Heft: | Version 15 February 2014 |
Seitenzahl: | 60 |
Erste Seite: | 1 |
Letzte Seite: | 56 |
HeBIS-PPN: | 348921470 |
Institute: | Wirtschaftswissenschaften / Wirtschaftswissenschaften |
Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF) | |
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) | |
Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE) | |
DDC-Klassifikation: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
Sammlungen: | Universitätspublikationen |
Lizenz (Deutsch): | Deutsches Urheberrecht |