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Asset Prices and Liquidity in an Exchange Economy

  • Ricardo Lagos

    ()

    (Economics Federal Reserve Bank of Minneapolis and New York University)

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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Paper provided by Society for Economic Dynamics in its series 2005 Meeting Papers with number 143.

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Date of creation: 2005
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Handle: RePEc:red:sed005:143
Contact details of provider: Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
Fax: 1-314-444-8731
Web page: http://www.EconomicDynamics.org/society.htm
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