Animal Spirits, Margin Requirements, and Stock Price Volatility
Paul Kupiec () and
Steven Sharpe ()
Journal of Finance, 1991, vol. 46, issue 2, 717-31
A simple overlapping generations model is used to characterize the effects of initial margin requirements in the volatility of risky asset prices. Investors are assumed to exhibit heterogenous preferences for risk-bearing, the distribution of which evolves stochastically across generations. This framework is used to show that imposing a binding initial marginal requirement may either increase or decrease stock price volatility, depending upon the microeconomic structure behind fluctuations in economywide average risk-bearing propensity. The ambiguous effect on volatility similarly arises when the source of heterogeneity is noise trader beliefs. Copyright 1991 by American Finance Association.
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Working Paper: Animal spirits, margin requirements, and stock price volatility (1990)
Working Paper: Animal spirits, margin requirements, and stock price volatility (1989)
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