The Implications of Heterogeneity and Inequality for Asset Pricing

69 Pages Posted: 13 Dec 2019

See all articles by Stavros Panageas

Stavros Panageas

University of California, Los Angeles (UCLA) - Finance Area; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: August 27, 2019

Abstract

Does heterogeneity matter for asset pricing? Starting with an irrelevance result, I classify the literature into two groups of papers taking different routes to make heterogeneity relevant for asset prices. The first group discusses models of investors who differ in terms of their preferences, beliefs, or access to markets. Despite their differences, these models have similar implications, and can be analyzed in a unified way. The second group of papers consists of models with investors experiencing uninsurable income shocks. I show that despite arriving at seemingly inconsistent conclusions, there is a common thread and a way to reconcile the results of this strand of the literature.

Keywords: Heterogeneous Agents, Heterogeneous preferences, Heterogeneous beliefs, Financial constraints, Incomplete Markets, Overlapping generations

JEL Classification: G1

Suggested Citation

Panageas, Stavros, The Implications of Heterogeneity and Inequality for Asset Pricing (August 27, 2019). Available at SSRN: https://ssrn.com/abstract=3494558 or http://dx.doi.org/10.2139/ssrn.3494558

Stavros Panageas (Contact Author)

University of California, Los Angeles (UCLA) - Finance Area ( email )

Los Angeles, CA 90095-1481
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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