We implement a dynamic asset pricing experiment in the spirit of Lucas (1978) with storable assets and non-storable cash. In one treatment we impose diminishing marginal returns to cash to incentivize consumption-smoothing across periods, while in a second treatment there is no induced motive...

We examine the effects of human capital on consumption, stock market, and other fluctuations in a general equilibrium continuous-time model. A representative consumer-worker-investor derives utility from consumption and leisure. A representative firm demands labour as the sole input to a...

I propose a consumption-based asset pricing model that jointly explains the high equity premium, the counter-cyclical behaviour of stock returns, the upward-sloping term structure of interest rates and the downward-sloping term structure of equity. The driving forces behind these results are...

If agents are ambiguity-averse and can invest in productive assets, asset prices can robustly exhibit indeterminacy in the markets that open after the productive investment has been launched. For indeterminacy to occur, the aggregate supply of goods must appear in precise configurations but the...

We report on six large-scale financial markets experiments that were designed to test two of the most basic propositions of modern asset pricing theory, namely, that the interaction between risk averse agents in a competitive market leads to equilibration, and that, in equilibrium, risk premia...

We study the existence of equilibria with endogenously complete markets in a continuous-time, heterogenous agents economy driven by a multidimensional diffusion process. Our main results show that if prices are real analytic as functions of time and the state variables of the model then a suffi-...

Homotheticity induces a dramatic statistical bias in the estimates of the intratemporal and intertemporal substitutions. I find potent support in favor of nonhomotheticity in aggregate consumption data, with nondurable goods being necessities and durable goods luxuries. I obtain the...

We prove existence of an Arrow-Debreu equilibrium when agents' preferences exhibit local substitution in the sense of Hindy, Huang, and Kreps (1992). Efficient allocations and supporting price functionals are identified and characterized. Under Hindy Huang Kreps preferences, equilibrium price...

In the present paper a tractable two-sector neo-classical growth model with heterogeneous agents is considered. The local dynamic properties of the equilibrium path are analyzed in relation with the underlying characteristics of the economy. In particular, the existence of fluctuations is...

We study transactions that require investments before trading in a competitive market, when forward contracts fixing the transaction price are absent. We show that, despite the market being perfectly competitive and subject to arbitrarily little uncertainty, the inability to jointly determine...