Trading Volumes in Dynamically Efficient Markets

Tony Berrada, Julien Hugonnier and Marcel Rindisbacher

FAME Research Paper Series from International Center for Financial Asset Management and Engineering

Abstract: The classic Lucas asset pricing model with complete markets stresses aggregate risk and, hence, fails to investigate the impact of agents heterogeneity on the dynamics of the equilibrium quantities and measures of trading volume. In this paper, we investigate under what conditions non-informational heterogeneity, i.e. differences in preferences and endowments, leads to non trivial trading volume in equilibrium. Our main result comes in form of a non-informational no trade theorem which provides necessary and sufficient conditions for zero trading volume in a dynamically efficient, continuous time Lucas market model with multiple goods and securities.

Keywords: General Equilibrium, Trading Volume; heterogenous agents; multiple goods; incomplete markets; no-trade theorem. (search for similar items in EconPapers)
JEL-codes: D51 D52 G11 G12 (search for similar items in EconPapers)
Date: 2005-03
New Economics Papers: this item is included in nep-fin and nep-mic
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