When is market incompleteness irrelevant for the price of aggregate risk (and when is it not)?

• 成果类型: Article
• 署名作者: Krueger, Dirk; Lustig, Hanno
• 署名单位: University of California System; University of California Los Angeles; University of Pennsylvania; National Bureau of Economic Research
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2009.10.005
• 发表日期: 2010
• 页码: 1-41
• 关键词: Asset pricing; risk sharing

摘要

In a standard incomplete markets model with a continuum of households that have constant relative risk aversion (CRRA) preferences, the absence of insurance markets for idiosyncratic labor income risk has no effect on the premium for aggregate risk if the distribution of idiosyncratic risk is independent of aggregate shocks and aggregate consumption growth is independent over time. In equilibrium, households Only use the stock market to smooth consumption; the bond market is inoperative. Furthermore, the cross-sectional distributions of wealth and consumption are not affected by aggregate shocks. These results hold regardless of the persistence of idiosyncratic shocks, even when households face tight solvency constraints. A weaker irrelevance result survives when we allow for predictability in aggregate consumption growth. (C) 2009 Elsevier Inc. All rights reserved.