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Comparative Valuation Dynamics in Production Economies: Long-Run Uncertainty, Heterogeneity, and Market Frictions

Author

Listed:
  • Lars Peter Hansen

    (Department of Economics, University of Chicago, Chicago, Illinois, USA)

  • Paymon Khorrami

    (The Fuqua School of Business, Duke University, Durham, North Carolina, USA)

  • Fabrice Tourre

    (Department of Economics and Finance, Baruch College, City University of New York, New York, NY, USA)

Abstract

We compare and contrast production economies exposed to long-run uncertainty with investors that have possibly different preferences and/or access to financial markets. We study the macroeconomic and asset-pricing properties of these models, identify common features, and highlight areas where these models depart from each other. Our framework allows us to investigate more fully the impact of investor heterogeneity, capital heterogeneity, and fluctuations of the growth components to the capital evolution as they affect the dynamics of macroeconomic quantities and asset prices. In our comparisons, we employ an array of diagnostic tools to explore time variation and state dependencies in nonlinear environments.

Suggested Citation

  • Lars Peter Hansen & Paymon Khorrami & Fabrice Tourre, 2024. "Comparative Valuation Dynamics in Production Economies: Long-Run Uncertainty, Heterogeneity, and Market Frictions," Annual Review of Financial Economics, Annual Reviews, vol. 16(1), pages 1-38, November.
    • Handle: RePEc:anr:refeco:v:16:y:2024:p:1-38
    DOI: 10.1146/annurev-financial-082123-105652
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    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D45 - Microeconomics - - Market Structure, Pricing, and Design - - - Rationing; Licensing
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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