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

Brogueira, Joao; Schuetze, Fabian
Authors registered in the RePEc Author Service: Fabian Schuetze and João Brogueira ()

No ECO2015/02, Economics Working Papers from European University Institute

Abstract: This note proves existence of a unique equilibrium in a Lucas (1978) economy when the utility function displays constant relative risk aversion and log dividends follow a normally distributed AR(1) process with positive auto-correlation. In particular, the note provides restrictions on the coefficient of relative risk aversion, the discount factor and the conditional variance of the consumption process that ensure 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: 2015
New Economics Papers: this item is included in nep-dge and nep-upt
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Related works:
Journal Article: Existence and uniqueness of equilibrium in Lucas’ asset pricing model when utility is unbounded (2017)
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