Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/200113
Authors: 
Branger, Nicole
Konermann, Patrick
Schlag, Christian
Year of Publication: 
2019
Series/Report no.: 
SAFE Working Paper No. 252
Abstract: 
We study the effects of market incompleteness on speculation, investor survival, and asset pricing moments, when investors disagree about the likelihood of jumps and have recursive preferences. We consider two models. In a model with jumps in aggregate consumption, incompleteness barely matters, since the consumption claim resembles an insurance product against jump risk and effectively reproduces approximate spanning. In a long-run risk model with jumps in the long-run growth rate, market incompleteness affects speculation, and investor survival. Jump and diffusive risks are more balanced regarding their importance and, therefore, the consumption claim cannot reproduce approximate spanning.
Subjects: 
market (in)completeness
heterogeneous beliefs
jumps in the longrungrowth rate
jumps in aggregate consumption
recursive preferences
JEL: 
D51
D52
G12
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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