Heterogeneous intermediary asset pricing

Mahyar Kargar

Journal of Financial Economics, 2021, vol. 141, issue 2, 505-532

Abstract: I show that the composition of the financial sector has important asset pricing implications beyond the health of the aggregate financial sector. To assess the impact of massive balance sheet adjustments within the intermediary sector during the Great Recession and resolve conflicting asset pricing evidence, I propose a dynamic asset pricing model with heterogeneous intermediaries facing financial frictions. Asset flows between intermediaries are quantitatively important for both the level of and variation in the risk premium. An empirical measure of the composition of the intermediary sector negatively forecasts future excess returns and is priced in the cross-section with a positive price of risk.

Keywords: Intermediary asset pricing; Heterogeneous intermediaries; Leverage; Financial frictions (search for similar items in EconPapers)
JEL-codes: G11 G12 G21 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:141:y:2021:i:2:p:505-532

DOI: 10.1016/j.jfineco.2021.04.012

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