Model uncertainty, limited market participation, and asset prices

• 成果类型: Article
• 署名作者: Cao, HH; Wang, T; Zhang, HH
• 署名单位: University of British Columbia; University of Texas System; University of Texas Dallas
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhi034
• 发表日期: 2005
• 页码: 1219
• 关键词: corporate diversification; equilibrium-model; RISK; consumption

摘要

We demonstrate that limited participation can arise endogenously in the presence of model uncertainty and heterogeneous uncertainty-averse investors. When uncertainty dispersion among investors is small, full participation prevails in equilibrium. Equity premium is related to the average uncertainty among investors and a conglomerate trades at a price equal to the sum of its single-segment components. When uncertainty dispersion is large, investors with high uncertainty choose not to participate in the stock market, resulting in limited market participation. When limited participation occurs, participation rate and equity premium can decrease in uncertainty dispersion and a conglomerate trades at a discount.