Idiosyncratic risk and financial policy

Andrés Carvajal and Herakles Polemarchakis

Journal of Economic Theory, 2011, vol. 146, issue 4, 1569-1597

Abstract: In economies subject to uninsurable idiosyncratic risks, competitive equilibrium allocations are constrained inefficient: reallocations of assets support Pareto superior allocations. This is the case even if the asset market for the allocation of aggregate risks is complete.

Keywords: Uninsurable; idiosyncratic; risks; Constrained; suboptimality (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (17)

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