A Note on Equity Premia in Markets with Heterogeneous Agents

Tatjana Chudjakow
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Tatjana Chudjakow: Center for Mathematical Economics, Bielefeld University

No 444, Center for Mathematical Economics Working Papers from Center for Mathematical Economics, Bielefeld University

Abstract: We analyze a static partial equilibrium model where the agents are not only heterogeneous in their beliefs about the return on risky assets but also in their attitude to it. While some agents in the economy are subjective utility maximizers others behave ambiguity averse in the sense of Knight (1921). If ambiguity averse agents meet overly optimistic subjective utility maximizers in the market lower equity premia can arise in the equilibrium than in a purely subjective utility framework.

Keywords: Ambiguity; Partial Equilibrium; Heterogeneous Agents; No- Trade Interval (search for similar items in EconPapers)
Pages: 19
Date: 2015-12-11
New Economics Papers: this item is included in nep-mic
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https://pub.uni-bielefeld.de/download/2900046/2900048 First Version, 2011 (application/x-download)

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Persistent link: https://EconPapers.repec.org/RePEc:bie:wpaper:444

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