Margin Requirements and Equilibrium Asset Prices

Daniele Coen-Pirani

No 2001-E5, GSIA Working Papers from Carnegie Mellon University, Tepper School of Business

Abstract: This paper studies the effect of margin requirements on asset prices, trading volume and investors' welfare in a general equilibrium asset pricing model where investors differ in their degree of risk aversion. In the stationary equilibrium of the model binding margin requirements decrease the riskless rate and increase its volatility, as well as stock trading volume. Contrary to previous partial equilibrium results, stock prices are not affected by margin requirements. Small changes in margin requirements produce large effects on the long-run distribution of wealth among investors. From a welfare perspective margin requirements might benefit the constrained less risk averse investors, while they always make more risk averse investors worse-off.

Date: 2000-12
References: Add references at CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www.andrew.cmu.edu/user/coenp/res_files/margins/paper.pdf
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.andrew.cmu.edu/user/coenp/res_files/margins/paper.pdf [302 Moved Temporarily]--> https://www.andrew.cmu.edu/user/coenp/res_files/margins/paper.pdf)

Related works:
Journal Article: Margin requirements and equilibrium asset prices (2005)
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:cmu:gsiawp:274394073

Ordering information: This working paper can be ordered from
https://student-3k.t ... /gsiadoc/GSIA_WP.asp

Access Statistics for this paper

More papers in GSIA Working Papers from Carnegie Mellon University, Tepper School of Business Tepper School of Business, Carnegie Mellon University, 5000 Forbes Avenue, Pittsburgh, PA 15213-3890.
Bibliographic data for series maintained by Steve Spear ().