Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/258425 
Year of Publication: 
2021
Citation: 
[Journal:] Journal of Risk and Financial Management [ISSN:] 1911-8074 [Volume:] 14 [Issue:] 7 [Article No.:] 321 [Publisher:] MDPI [Place:] Basel [Year:] 2021 [Pages:] 1-15
Publisher: 
MDPI, Basel
Abstract: 
In an exchange economy with endowment inequality, we investigate how preferences with external habits affect the equity risk premium. We show that the dynamics of external additive habits with wealth inequality are complex when a background risk is present. It is ambiguous whether wealth inequality will increase or decrease the equity premium even when the income uncertainty is low. This result extends literature by suggesting that wealth inequality has a small role in explaining asset pricing puzzles.
Subjects: 
asset prices
background risk
habits
wealth inequality
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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