Asset prices in a Huggett economy

• 成果类型: Article
• 署名作者: Krusell, Per; Mukoyama, Toshihiko; Smith, Anthony A., Jr.
• 署名单位: Yale University; National Bureau of Economic Research; University of Virginia
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2011.04.003
• 发表日期: 2011
• 页码: 812-844
• 关键词: Incomplete markets; asset prices; borrowing constraints; equity premium

摘要

This paper explores asset pricing in economies where there is no direct insurance against idiosyncratic risks but other assets can be used for self-insurance, subject to exogenously-imposed borrowing limits. We analyze an endowment economy, based on Huggett (1993) [11], both with and without aggregate risk. Our main innovation is that we obtain full analytical tractability by studying the case with maximally tight borrowing constraints. We illustrate by looking at riskless bonds, equity, and the term structure of interest rates, and we show that the model can reproduce many features of observed asset prices when idiosyncratic risks are quantitatively reasonable. (C) 2011 Elsevier Inc. All rights reserved.