Heterogeneous Impatience in a Continuous-Time Model
In a continuous-time economy with complete markets, we study how the heterogeneity in the individual consumers' risk tolerance and impatience affects the representative consumer's risk tolerance and impatience. We derive some formulas, which indicate that the representative consumer's impatience decrease over time, and whether his risk tolerance increases or decreases over time depends on the sign of some weighted covariance between the individual consumers' cautiousness (derivative of risk tolerance with respect to own consumptions) and impatience. These results are then used to show that the short rate tends to decrease over time and the market price of risk is volatile in some special cases of heterogeneous economies.
|Date of creation:||Jan 2009|
|Contact details of provider:|| Postal: Yoshida-Honmachi, Sakyo-ku, Kyoto 606-8501|
Web page: http://www.kier.kyoto-u.ac.jp/eng/index.html
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Martin Lettau & Sydney C. Ludvigson & Jessica A. Wachter, 2008.
"The Declining Equity Premium: What Role Does Macroeconomic Risk Play?,"
Review of Financial Studies,
Society for Financial Studies, vol. 21(4), pages 1653-1687, July.
- Martin Lettau & Sydney Ludvigson & Jessica A. Wachter, 2005. "The declining equity premium: what role does macroeconomic risk play?," Proceedings, Board of Governors of the Federal Reserve System (U.S.).
- Martin Lettau & Sydney C. Ludvigson & Jessica A. Wachter, 2004. "The Declining Equity Premium: What Role Does Macroeconomic Risk Play?," NBER Working Papers 10270, National Bureau of Economic Research, Inc.
- Lettau, Martin & Ludvigson, Sydney & Wachter, Jessica, 2006. "The Declining Equity Premium: What Role Does Macroeconomic Risk Play?," CEPR Discussion Papers 5519, C.E.P.R. Discussion Papers.
- Martin Lettau & Sydney C. Ludvigson, 2004. "The Declining Equity Premium: What Role Does Macroeconomic Risk Play?," 2004 Meeting Papers 644, Society for Economic Dynamics.
- Chiaki Hara, 2006.
"Heterogeneous Risk Attitudes In A Continuous-Time Model,"
The Japanese Economic Review,
Japanese Economic Association, vol. 57(3), pages 377-405.
- Chiaki Hara, 2005. "Heterogeneous Risk Attitudes in a Continuous-Time Model," KIER Working Papers 609, Kyoto University, Institute of Economic Research.
- Ravi Jagannathan & Ellen R. McGrattan & Anna Scherbina, 2000. "The declining U.S. equity premium," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 3-19.
- Hara, Chiaki, 2008. "Complete monotonicity of the representative consumer's discount factor," Journal of Mathematical Economics, Elsevier, vol. 44(12), pages 1321-1331, December.
- Chiaki Hara, 2007. "Complete Monotonicity of the Representative Consumer's Discount Factor," KIER Working Papers 636, Kyoto University, Institute of Economic Research.
- Hara, Chiaki, 2008. "Complete Monotonicity of the Representative Consumer's Discount Factor," PIE/CIS Discussion Paper 367, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
- Christian Gollier & Richard Zeckhauser, 2005. "Aggregation of Heterogeneous Time Preferences," Journal of Political Economy, University of Chicago Press, vol. 113(4), pages 878-896, August. Full references (including those not matched with items on IDEAS)