EconPapers    
Economics at your fingertips  
 

On portfolio frictions, asset returns and volatility

Aurélien Eyquem, Céline Poilly and Anna Belianska

European Economic Review, 2023, vol. 160, issue C

Abstract: We rationalize the observed short-run differences in corporate and long-term government bond yields in an financial-accelerator model with frictions that restrict changes in portfolio shares. We estimate the model on quarterly data for the Euro Area from 1999 to 2019, and show that the portfolio friction parameter is positive and significant. Portfolio frictions not only generate a time-varying wedge between the two returns that fits the data, but also raise the volatility of return differentials, and the precautionary motive of savers. As a result, the macroeconomic effects of uncertainty shocks are amplified by portfolio frictions.

Keywords: Portfolio frictions; Financial accelerator; Uncertainty shocks (search for similar items in EconPapers)
JEL-codes: E52 E62 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0014292123002519
Full text for ScienceDirect subscribers only

Related works:
Working Paper: On Portfolio Frictions, Asset Returns and Volatility * (2023)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:160:y:2023:i:c:s0014292123002519

DOI: 10.1016/j.euroecorev.2023.104623

Access Statistics for this article

European Economic Review is currently edited by T.S. Eicher, A. Imrohoroglu, E. Leeper, J. Oechssler and M. Pesendorfer

More articles in European Economic Review from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2025-03-23
Handle: RePEc:eee:eecrev:v:160:y:2023:i:c:s0014292123002519