Equilibrium Portfolios in the Neoclassical Growth Model
AbstractThis paper studies equilibrium portfolios in the standard neoclassical growth model under uncertainty with heterogeneous agents and dinamically complete markets. Preferences are purposely restricted to be quasi-homothetic. The main source of heterogeneity across agents is due to different endowments of shares of the representative firm at date 0. Fixing portfolios is the optimal strategy in stationary endowment economies with dinamically complete markets. Whenever an environment displays changing degrees of heterogeneity across agents, the trading strategy of fixed portfolios cannot be optimal in equilibrium. Very importantly, our framework can generate changing heterogeneity if and only if either minimum consumption requirements are not zero or labor income is not zero and the value of human and non-human wealth are linearly independent.
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Bibliographic InfoPaper provided by Universidad de San Andres, Departamento de Economia in its series Working Papers with number 87.
Length: 31 pages
Date of creation: Dec 2005
Date of revision: Dec 2005
neoclassical growth model; equilibrium portfolios; complete markets;
Other versions of this item:
- Espino, Emilio, 2007. "Equilibrium portfolios in the neoclassical growth model," Journal of Economic Theory, Elsevier, vol. 137(1), pages 673-687, November.
- Emilio Espino, 2006. "Equilibrium Portfolios in the Neoclassical Growth Model," 2006 Meeting Papers 92, Society for Economic Dynamics.
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
- D90 - Microeconomics - - Intertemporal Choice - - - General
- E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
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