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Discussion Papers, Kellogg School of Management, Northwestern University >
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http://hdl.handle.net/10419/31251
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Full metadata record
| DC Field | | Value | | Language |
| dc.contributor.author | | Schmedders, Karl | | en_US |
| dc.date.accessioned | | 2010-05-14T10:19:19Z | | - |
| dc.date.available | | 2010-05-14T10:19:19Z | | - |
| dc.date.issued | | 2004 | | en_US |
| 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_US |
| dc.language.iso | | eng | | en_US |
| dc.publisher | | Northwestern Univ., Kellogg Graduate School of Management, Center for Mathematical Studies in Economics and Management Science Evanston | | en_US |
| dc.relation.ispartofseries | | Discussion paper // Center for Mathematical Studies in Economics and Management Science 1398 | | en_US |
| dc.subject.jel | | D53 | | en_US |
| dc.subject.jel | | G11 | | en_US |
| dc.subject.jel | | G12 | | en_US |
| dc.subject.ddc | | 330 | | en_US |
| dc.subject.keyword | | Portfolio separation | | en_US |
| dc.subject.keyword | | dynamically complete markets | | en_US |
| dc.subject.keyword | | consol | | en_US |
| dc.subject.keyword | | oneperiod bond | | en_US |
| dc.subject.keyword | | interest rate fluctuation | | en_US |
| dc.subject.keyword | | reinvestment risk | | en_US |
| dc.title | | Two-fund separation in dynamic general equilibrium | | en_US |
| dc.type | | Working Paper | | en_US |
| dc.identifier.ppn | | 586189106 | | en_US |
| dc.rights | | http://www.econstor.eu/dspace/Nutzungsbedingungen | | - |
| Appears in Collections: | | Discussion Papers, Kellogg School of Management, Northwestern University
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