Aggregate implications of micro asset market segmentation

► Quantifies macro-implications of many partially integrated micro-financial markets. ► Segmentation determines idiosyncratic risk born by agents in each micro-market. ► Segmentation calibrated to match systematic and idiosyncratic return volatility. ► Homogeneous segmentation: agents bear 30% of idiosyncratic risk, equity premium 2.4%. ► Welfare costs of segmentation substantial, 1.8% of lifetime consumption.