Tony Berrada (HEC Montreal, CIRANO and CREF) Julien Hugonnier () (University of Lausanne, CIRANO and FAME) Marcel Rindisbacher (Rotman School of Management, University of Toronto and CIRANO)
Abstract
The classic Lucas asset pricing model with complete markets stresses aggregate risk and, hence, fails to investigate the impact of agents heterogeneity on the dynamics of the equilibrium quantities and measures of trading volume. In this paper, we investigate under what conditions non-informational heterogeneity, i.e. differences in preferences and endowments, leads to non trivial trading volume in equilibrium. Our main result comes in form of a non-informational no trade theorem which provides necessary and sufficient conditions for zero trading volume in a dynamically efficient, continuous time Lucas market model with multiple goods and securities.
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Publisher Info
Paper provided by International Center for Financial Asset Management and Engineering in its series FAME Research Paper Series with number
rp139.