Wealth Inequality and Asset Pricing

Christian Gollier ()

Working Papers from Toulouse - GREMAQ

Abstract: We consider an economy with a complete set of competitive markets for contingent claims. We examine how wealth inequality affects the equilibrium value of the equity premium and the risk-free rate. We forst show that welath inequality raises the equity premium if and only if the inverse of absolute risk aversion is concave in welath. We also show that the equilibrium risk-free rate is reduced by wealth inequality if the inverse of the coefficient of absolute prudence is concave.

Keywords: RISK; WEALTH; PRICING; EQUITY (search for similar items in EconPapers)
JEL-codes: D31 D63 G12 (search for similar items in EconPapers)
Pages: 19 pages
Date: 1997
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Citations: View citations in EconPapers (2)

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Journal Article: Wealth Inequality and Asset Pricing (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:fth:gremaq:97.486

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