Please use this identifier to cite or link to this item:
https://hdl.handle.net/10419/31251
Full metadata record
DC Field | Value | Language |
---|---|---|
dc.contributor.author | Schmedders, Karl | en |
dc.date.accessioned | 2010-05-14T10:19:19Z | - |
dc.date.available | 2010-05-14T10:19:19Z | - |
dc.date.issued | 2004 | - |
dc.identifier.uri | http://hdl.handle.net/10419/31251 | - |
dc.description.abstract | This paper examines the two-fund separation paradigm in the context of an infinite-horizon general equilibrium model with dynamically complete markets and heterogeneous consumers with time- and state-separable utility functions. With the exception of the dynamic structure, we maintain the assumptions of the classical static models that exhibit two-fund separation with a riskless security. Agents have equi-cautious HARA utility functions. In addition to a security with state-independent payoffs, agents can trade a collection of assets with dividends following a time-homogeneousMarkov process. We make no further assumptions about the distribution of asset dividends, returns, or prices. If the riskless security in the economy is a consol then agents' portfolios exhibit two-fund separation. However, if agents can trade only a one-period bond, this result no longer holds. The underlying intuition is that general equilibrium restrictions lead to interest rate fluctuations that destroy the optimality of two-fund separation in economies with a one-period bond and result in different equilibrium portfolios. | en |
dc.language.iso | eng | en |
dc.publisher | |aNorthwestern University, Kellogg School of Management, Center for Mathematical Studies in Economics and Management Science |cEvanston, IL | en |
dc.relation.ispartofseries | |aDiscussion Paper |x1398 | en |
dc.subject.jel | D53 | en |
dc.subject.jel | G11 | en |
dc.subject.jel | G12 | en |
dc.subject.ddc | 330 | en |
dc.subject.keyword | Portfolio separation | en |
dc.subject.keyword | dynamically complete markets | en |
dc.subject.keyword | consol | en |
dc.subject.keyword | oneperiod bond | en |
dc.subject.keyword | interest rate fluctuation | en |
dc.subject.keyword | reinvestment risk | en |
dc.title | Two-fund separation in dynamic general equilibrium | - |
dc.type | Working Paper | en |
dc.identifier.ppn | 586189106 | en |
dc.rights | http://www.econstor.eu/dspace/Nutzungsbedingungen | en |
dc.identifier.repec | RePEc:nwu:cmsems:1398 | en |
Files in This Item:
Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.