Journal article

Asset trading volume in infinite-horizon economies with dynamically complete markets and heterogeneous agents: Comment

In a recent paper, Judd et al. [2003. Journal of Finance 58, 2203-2217] study asset trading in a version of the standard Lucas infinite horizon economy with heterogeneous agents. They report the surprising finding that (for generic economies in their class), in equilibrium, there is no trade in (long-lived) assets after the initial date. This note points out that the conclusions of Judd et al. [2003. Journal of Finance 58, 2203-2217] are artifacts of the assumption that asset dividends and individual endowments follow the same stationary finite state Markov process. Without this assumption-and even if asset dividends and aggregate endowments follow the same stationary process-there will necessarily be trade at many histories. © 2006 Elsevier Inc. All rights reserved.

    Keywords: Asset volume ; Lucas asset pricing model


    California Institute of Technology, m/c 228-77, Pasadena, CA 91125, United States Centre for Economic Policy Research, 90-98 Goswell Rd, London, EC1V 7RR, United Kingdom Department of Economics, UCLA, Los Angeles, CA 90024, United States

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    Cited By (since 1996): 3

    Export Date: 10 March 2008

    Source: Scopus


    Record created on 2008-03-12, modified on 2016-08-08


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