Due to wealth effects, the price of a security may vary with the realization of an underlying risk factor even when the security's dividend is independent of that factor. This paper highlights a crucial component of these effects hitherto ignored by the literature: changes in wealth do not alter...

Currently, financial economics is unable to predict changes in asset prices with respect to changes in the underlying risk factors, even when an asset's dividend is independent of a given factor. This paper takes steps towards addressing this issue by highlighting a crucial component of wealth...

We propose a simple test that uses information on workers’ mobility, wages and firms’ profits to identify the sign and strength of assortative matching. The basic intuition underlying our empirical strategy is that, in the presence of positive (negative) assortative matching, good workers...

We present a partnership model where heterogeneous agents bargain over the gains from trade and search on the match. Frictions allow agents to extract higher rents from more productive partners, generating an endogenous preference for high types. More productive agents upgrade their partners...

We propose a test that uses information on workers’ mobility, wages and firms’ profits to identify the sign and strength of assortative matching. The basic intuition underlying our empirical strategy is that, in the presence of positive (negative) assortative matching, good workers are more...

We provide a general characterization of diffusion processes, allowing to analyze both risk-sharing and contagion at the same time. We show that interdependencies are beneficial when the economic environment is favorable, and detrimental when the economic environment deteriorates. The risk of...

In a single-commodity, pure-exchange, representative-agent economy with many Lucas' trees whose dividends are geometric Brownian motions, I study the comparative statics of the prices of these assets with respect to the current Brownian realization. As is well-known, due to wealth effects, a...