Asset Prices and Liquidity in an Exchange Economy

Posted: 25 Jul 2008

See all articles by Ricardo Lagos

Ricardo Lagos

New York University (NYU) - Department of Economics

Date Written: May 1, 2006

Abstract

I develop an asset-pricing model in which financial assets are valued for their liquidity-the extent to which they are useful in facilitating exchange-as well as for being claims to streams of consumption goods. The implications for average asset returns, the equity-premium puzzle and the risk-free rate puzzle, are explored in a version of the model that nests the work of Mehra and Prescott (1985).

Keywords: Asset Pricing, Liquidity, Exchange, Equity Premium, Risk-Free Rate

JEL Classification: D42, E52, G12

Suggested Citation

Lagos, Ricardo, Asset Prices and Liquidity in an Exchange Economy (May 1, 2006). Available at SSRN: https://ssrn.com/abstract=1171983

Ricardo Lagos (Contact Author)

New York University (NYU) - Department of Economics ( email )

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