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Asset Pricing with Home Capital


  • Michal Pakos


I analyze a stylized consumption-based asset pricing model that features heterogeneous agents and household capital, and discover a novel recession risk factor related to the cross-sectional second moments of the corresponding investments into such home capital. In order to fully isolate the orthogonal effects at work, I completely shut off the well-known mechanism of Constantinides and Duffie (1996) by explicitly stipulating homoscedastic cross-sectional distribution of nondurable goods and services.

Suggested Citation

  • Michal Pakos, 2008. "Asset Pricing with Home Capital," GSIA Working Papers 2007-E28, Carnegie Mellon University, Tepper School of Business.
  • Handle: RePEc:cmu:gsiawp:2145807827

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