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An Equilibrium Model with Restricted Stock Market Participation

An Equilibrium Model with Restricted Stock Market Participation This article solves the equilibrium problem in a pure-exchange, continuous-time economy in which some agents face information costs or other types of frictions effectively preventing them from investing in the stock market. Under the assumption that the restricted agents have logarithmic utilities, a complete characterization of equilibrium prices and consumption/investment policies is provided. A simple calibration shows that the model can help resolve some of the empirical asset pricing puzzles. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Review of Financial Studies Oxford University Press

An Equilibrium Model with Restricted Stock Market Participation

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Publisher
Oxford University Press
Copyright
© 1998 The Society for Financial Studies
ISSN
0893-9454
eISSN
1465-7368
DOI
10.1093/rfs/11.2.309
Publisher site
See Article on Publisher Site

Abstract

This article solves the equilibrium problem in a pure-exchange, continuous-time economy in which some agents face information costs or other types of frictions effectively preventing them from investing in the stock market. Under the assumption that the restricted agents have logarithmic utilities, a complete characterization of equilibrium prices and consumption/investment policies is provided. A simple calibration shows that the model can help resolve some of the empirical asset pricing puzzles.

Journal

The Review of Financial StudiesOxford University Press

Published: Apr 3, 1998

References