Financial Markets Equilibrium with Heterogeneous Agents

Jaksa Cvitanic (1) , Elyès Jouini (2) , Semyon Malamud (3) , Clotilde Napp (4)

1 Division of the humanities and social sciences
2 CEREMADE - CEntre de REcherches en MAthématiques de la DEcision
3 Swiss Finance Institute [Geneva]
4 DRM - Dauphine Recherches en Management

This paper presents an equilibrium model in a pure exchange economy when investors have three possible sources of heterogeneity. Investors may dier in their beliefs, in their level of risk aversion and in their time preference rate. We study the impact of investors heterogeneity on the properties of the equilibrium. In particular, we analyze the consumption shares, the market price of risk, the risk free rate, the bond prices at dierent maturities, the stock price and volatility as well as the stock's cumulative returns, and optimal portfolio strategies. We relate the heterogeneous economy with the family of associated homogeneous economies with only one class of investors. We consider cross sectional as well as asymptotic properties.

Mots clés: equilibrium; heterogeneous agents; volatility; optimal portfolios; survival; yield curve; long yield

Domaines: Economies et finances

Jaksa Cvitanic, Elyès Jouini, Semyon Malamud, Clotilde Napp. Financial Markets Equilibrium with Heterogeneous Agents. Review of Finance, 2012, 16 (1), pp.285-321. ⟨10.1093/rof/rfr018⟩. ⟨halshs-00488537⟩