Wealth Inequality and Asset Pricing
AbstractWe consider an economy with a complete set of competitive markets for contingent claims. We examine how wealth inequality affects the equilibrium value of the equity premium and the risk-free rate. We forst show that welath inequality raises the equity premium if and only if the inverse of absolute risk aversion is concave in welath. We also show that the equilibrium risk-free rate is reduced by wealth inequality if the inverse of the coefficient of absolute prudence is concave.
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Bibliographic InfoPaper provided by Toulouse - GREMAQ in its series Papers with number 97.486.
Length: 19 pages
Date of creation: 1997
Date of revision:
Contact details of provider:
Postal: GREMAQ, Universite de Toulouse I Place Anatole France 31042 - Toulouse CEDEX France.
Fax: 05 61 22 55 63
Web page: http://www-gremaq.univ-tlse1.fr/
More information through EDIRC
RISK ; WEALTH ; PRICING ; EQUITY;
Other versions of this item:
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
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