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Asset prices and liquidity in an exchange economy

  • Lagos, Ricardo

An asset-pricing model is developed, in which financial assets are valued for their liquidity--the extent to which they are useful in facilitating exchange--as well as for being claims to streams of consumption goods. The theory is used to study the implications of this liquidity channel for average asset returns, the equity-premium puzzle and the risk-free rate puzzle.

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File URL: http://www.sciencedirect.com/science/article/B6VBW-51BBM0J-1/2/2186078325e4f8518e4529b152d669b6
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Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 57 (2010)
Issue (Month): 8 (November)
Pages: 913-930

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Handle: RePEc:eee:moneco:v:57:y:2010:i:8:p:913-930
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505566

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