SFB 303 Discussion Paper No. A - 381

Author: Constantinides, George M., and Darrel Duffie
Title: Asset Pricing with Heterogeneous Consumers
Abstract: Empirical difficulties encountered by representative-consumer models are resolved in an economy with heterogeneity in the form of uninsurable, persistent, and heteroscedastic labor income shocks. Given the joint process of arbitrage-free asset prices, dividends, and aggregate income, satisfying a certain joint restriction, it is shown that these processes are supported in the equilibrium of an economy with judiciously modeled income heterogeneity. This restriction implies that the Euler equations of per-capita consumption are replaced by Euler inequalities of per capita-consumption. To the extent that these inequalities have been tested so far, they have not been rejected with risk aversion coefficients as low as one.
Creation-Date: August 1992
Unfortunately this paper is not available. Please order a hardcopy via e-mail.

SFB 303 Homepage

31.03.1998, Webmaster