Asset Trading Volume with Dynamically Complete Markets and Heterogeneous Agents

Posted: 18 Oct 2003

See all articles by Kenneth L. Judd

Kenneth L. Judd

Stanford University - The Hoover Institution on War, Revolution and Peace; Center for Robust Decisionmaking on Climate & Energy Policy (RDCEP); National Bureau of Economic Research (NBER)

Felix Kubler

University of Zurich; Swiss Finance Institute

Karl Schmedders

University of Zurich

Abstract

Trading volume of infinitely lived securities, such as equity, is generically zero in Lucas asset pricing models with heterogeneous agents. More generally, the end-of-period portfolio of all securities is constant over time and states in the generic economy. General equilibrium restrictions rule out trading of equity after an initial period. This result contrasts the prediction of portfolio allocation analyses that portfolio rebalancing motives produce nontrivial trade volume. Therefore, other causes of trade must be present in asset markets with large trading volume.

Suggested Citation

Judd, Kenneth L. and Kubler, Felix E. and Schmedders, Karl, Asset Trading Volume with Dynamically Complete Markets and Heterogeneous Agents. Journal of Finance, Vol. 58, pp. 2203-2218, October 2003. Available at SSRN: https://ssrn.com/abstract=447375

Kenneth L. Judd (Contact Author)

Stanford University - The Hoover Institution on War, Revolution and Peace ( email )

Stanford, CA 94305-6010
United States

Center for Robust Decisionmaking on Climate & Energy Policy (RDCEP) ( email )

5735 S. Ellis Street
Chicago, IL 60637
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Felix E. Kubler

University of Zurich ( email )

Rämistrasse 71
Zürich, CH-8006
Switzerland

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Karl Schmedders

University of Zurich ( email )

Moussonstrasse 15
Zürich, CH-8044
Switzerland
+41 (0)44 634 3770 (Phone)

Register to save articles to
your library

Register

Paper statistics

Abstract Views
414
PlumX Metrics