Abstract
This article studies the equilibrium properties of asset prices in a Lucas tree model when agents display a concave coefficient of absolute risk tolerance. This preference specification introduces a role for wealth inequality even under the presence of complete markets. The article finds evidence suggesting that the role of wealth inequality on asset prices may be non-negligible. The equity premium in the unequal economy is between 24 and 47 basis points larger than the equity premium displayed in an egalitarian economy.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
