A quantitative study of the role of wealth inequality on asset prices

Juan Hatchondo

Economic Quarterly, 2008, vol. 94, issue Win, 73-96

Abstract: This article studies the equilibrium properties of asset prices in a Lucas tree model when agents display a concave coefficient of absolute risk tolerance. This preference specification introduces a role for wealth inequality even under the presence of complete markets. The article finds evidence suggesting that the role of wealth inequality on asset prices may be non-negligible. The equity premium in the unequal economy is between 24 and 47 basis points larger than the equity premium displayed in an egalitarian economy.

Keywords: Prices (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (4)

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