A Demand System Approach to Asset Pricing

Ralph S. J. Koijen and Motohiro Yogo

Journal of Political Economy, 2019, vol. 127, issue 4, 1475 - 1515

Abstract: We develop an asset pricing model with flexible heterogeneity in asset demand across investors, designed to match institutional and household holdings. A portfolio choice model implies characteristics-based demand when returns have a factor structure and expected returns and factor loadings depend on the assets’ own characteristics. We propose an instrumental variables estimator for the characteristics-based demand system to address the endogeneity of demand and asset prices. Using US stock market data, we illustrate how the model could be used to understand the role of institutions in asset market movements, volatility, and predictability.

Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (161)

Downloads: (external link)
http://dx.doi.org/10.1086/701683 (application/pdf)
http://dx.doi.org/10.1086/701683 (text/html)
Access to the online full text or PDF requires a subscription.

Related works:
Working Paper: A Demand System Approach to Asset Pricing (2015)
Working Paper: A Demand System Approach to Asset Pricing (2015)
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:ucp:jpolec:doi:10.1086/701683

Access Statistics for this article

More articles in Journal of Political Economy from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().