A quantitative study of the role of wealth inequality on asset prices

Juan Carlos Hatchondo

No 05-12, Working Paper from Federal Reserve Bank of Richmond

Abstract: This paper studies the equilibrium properties of asset prices in a Lucas-tree model when agents display a concave coefficient of absolute risk tolerance. The latter introduces a role for wealth inequality, even under the presence of complete markets. The paper finds evidence suggesting that the role of wealth inequality on asset prices may be non-negligible. For the baseline calibration, the equity premium in the unequal economy is half a percentage point larger than the equity premium displayed by an egalitarian economy. The difference increases to one percentage point once we allow for the fact that agents tend to hold highly concentrated portfolios.

Keywords: Wealth; Asset pricing (search for similar items in EconPapers)
Date: 2005
New Economics Papers: this item is included in nep-dge and nep-fin
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.richmondfed.org/publications/research/w ... rs/2005/wp_05-12.cfm (text/html)
Our link check indicates that this URL is bad, the error code is: 403 Forbidden
https://www.richmondfed.org/-/media/RichmondFedOrg ... 2005/pdf/wp05-12.pdf Full text (application/pdf)
Our link check indicates that this URL is bad, the error code is: 403 Forbidden

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedrwp:05-12

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Working Paper from Federal Reserve Bank of Richmond Contact information at EDIRC.
Bibliographic data for series maintained by Christian Pascasio ().