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Live fast, die young: equilibrium and survival in large economies

hal.structure.identifierCEntre de REcherches en MAthématiques de la DEcision [CEREMADE]
dc.contributor.authorBeddock, Arthur
hal.structure.identifierCEntre de REcherches en MAthématiques de la DEcision [CEREMADE]
dc.contributor.authorJouini, Elyès
dc.date.accessioned2020-05-15T09:55:23Z
dc.date.available2020-05-15T09:55:23Z
dc.date.issued2021
dc.identifier.issn1432-0479
dc.identifier.urihttps://basepub.dauphine.fr/handle/123456789/20744
dc.language.isoenen
dc.subjectHeterogeneous beliefs · Heterogeneous time preference rates · Continuum of agents · Asset pricing · Market elimination · Surviving agent
dc.subject.ddc332en
dc.subject.classificationjelG.G1.G11en
dc.titleLive fast, die young: equilibrium and survival in large economies
dc.typeArticle accepté pour publication ou publié
dc.description.abstractenWe model a continuous-time economy with a continuum of investors who differ both in belief and time preference rate and analyze the impact of these heterogeneities on the behavior of financial markets. In particular, we allow the two types of heterogeneity to be correlated: a negative correlation means that the most optimistic agents are also the most patient ones. We fully characterize the risk-free rate which is procyclical and the market price of risk which is countercyclical. When the two types of heterogeneity are negatively correlated, the former is higher and the latter lower compared to the standard case. A negative correlation also leads to a higher market volatility. Moreover, we find that the trading volume increases with the variance of the belief heterogeneity distribution. Finally, the surviving agent of this economy is not necessarily the one who maximizes her utility over her lifetime: a shorter life might be more rewarding than a longer one.
dc.relation.isversionofjnlnameEconomic Theory
dc.relation.isversionofjnlvol71
dc.relation.isversionofjnldate2021
dc.relation.isversionofjnlpages961–996
dc.relation.isversionofdoi10.1007/s00199-020-01268-y
dc.relation.isversionofjnlpublisherSpringer
dc.subject.ddclabelEconomie financièreen
dc.relation.forthcomingouien
dc.relation.forthcomingprintouien
dc.description.ssrncandidatenon
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dc.description.readershiprecherche
dc.description.audienceInternational
dc.relation.Isversionofjnlpeerreviewedoui
dc.date.updated2022-01-31T08:36:20Z
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