Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5070016 | Finance Research Letters | 2006 | 6 Pages |
Abstract
In a recent paper, Judd et al. [2003. Journal of Finance 58, 2203-2217] study asset trading in a version of the standard Lucas infinite horizon economy with heterogeneous agents. They report the surprising finding that (for generic economies in their class), in equilibrium, there is no trade in (long-lived) assets after the initial date. This note points out that the conclusions of Judd et al. [2003. Journal of Finance 58, 2203-2217] are artifacts of the assumption that asset dividends and individual endowments follow the same stationary finite state Markov process. Without this assumption-and even if asset dividends and aggregate endowments follow the same stationary process-there will necessarily be trade at many histories.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Peter Bossaerts, William R. Zame,