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Existence and uniqueness of equilibrium in Lucas’ asset pricing model when utility is unbounded

João Brogueira () and Fabian Schütze
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João Brogueira: European University Institute
Fabian Schütze: European University Institute

Authors registered in the RePEc Author Service: Fabian Schuetze

Economic Theory Bulletin, 2017, vol. 5, issue 2, No 6, 179-190

Abstract: Abstract This note presents a proof of the existence of a unique equilibrium in a Lucas (Econometrica 46(6):1429–1445, 1978) economy when the utility function displays constant relative risk aversion, and the logarithm of dividends follow a normally distributed autoregressive process of order one with positive autocorrelation. We provide restrictions on the coefficient of relative risk aversion, the discount factor and the conditional variance of the consumption process that ensure the existence of a unique equilibrium.

Keywords: Asset pricing; Exchange economy; Dynamic programming; Equilibrium conditions (search for similar items in EconPapers)
JEL-codes: C61 C62 D51 G12 (search for similar items in EconPapers)
Date: 2017
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Working Paper: Existence and uniqueness of equilibrium in Lucas' asset pricing model when utility is unbounded (2015) Downloads
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DOI: 10.1007/s40505-016-0112-1

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