Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/148164
Authors: 
Bottazzi, Giulio
Dindo, Pietro
Giachini, Daniele
Year of Publication: 
2015
Series/Report no.: 
LEM Working Paper Series 2015/29
Abstract: 
We consider an exchange economy with heterogeneous agents and multiple assets and investigate the coupled dynamics of assets' prices and agents' wealth. We assume that agents have heterogeneous beliefs and invest on each asset a fraction of wealth proportional to its expected dividends. Our main finding is that long-run coexistence of heterogeneous agents is a generic outcome of the market dynamics. We provide sufficient conditions for the latter, as well as sufficient conditions for the relative wealth of any given agent converging to zero or to one. Since we use a direct approach that combines the inter-temporal dynamics of wealth and prices via agents' portfolio rules, we can characterize when long-run heterogeneity occurs for both complete and incomplete asset markets.
Subjects: 
Market Selection Hypothesis
Heterogeneous Beliefs
Evolutionary Finance
Incomplete Markets
Asset Pricing
Generalized Kelly rule
JEL: 
C60
D52
D53
G11
G12
Document Type: 
Working Paper

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