Template-Type: ReDIF-Paper 1.0
Title: Investment and the Aggregation of Risks
Author-Name: Jayasri Dutta
Author-Name: Heraklis Polemarchakis

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Abstract: A competitive equilibrium may preserve, even magnify, 
 firm-specific risks in the aggregate. This is the case if 
 firms can anticipate their productivites when they make 
 investment decisions or, alternatively, if capital can be 
 reallocated once the productivites of firms are realized. In 
 a large economy, output is serially correlated and the real 
 rate of interest varies countercyclically. On the contrary, 
 in a large economy without anticipation or shiftable 
 investment, a competitive equilibrium is essentially 
 riskless.
Series: Sonderforschungsbereich 303, University of Bonn, Germany

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Creation-Date: 1990-03
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Handle: RePEc:bon:bonsfa:283