NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
loading...

Incentive Constrained Risk Sharing, Segmentation, and Asset Pricing

Bruno Biais, Johan Hombert, Pierre-Olivier Weill

NBER Working Paper No. 23986
Issued in November 2017
NBER Program(s):Asset Pricing, Economic Fluctuations and Growth

Incentive problems make assets imperfectly pledgeable. Introducing these problems in an otherwise canonical general equilibrium model yields a rich set of implications. Asset markets are endogenously segmented. There is a basis going always in the same direction, as the price of any risky asset is lower than that of the replicating portfolio of Arrow securities. Equilibrium expected returns are concave in consumption betas, in line with empirical findings. As the dispersion of consumption betas of the risky assets increases, incentive constraints are relaxed and the basis reduced. When hit by adverse shocks, relatively risk tolerant agents sell the safest assets they hold.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Access to NBER Papers

You are eligible for a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w23986

Users who downloaded this paper also downloaded* these:
Bocola and Lorenzoni w23984 Financial Crises, Dollarization, and Lending of Last Resort in Open Economies
Mankiw and Reis w24043 Friedman's Presidential Address in the Evolution of Macroeconomic Thought
Krishnamurthy and Muir w23850 How Credit Cycles across a Financial Crisis
Aghion, Jones, and Jones w23928 Artificial Intelligence and Economic Growth
Chu, Hirshleifer, and Ma w24144 The Causal Effect of Limits to Arbitrage on Asset Pricing Anomalies
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us