| Author: | Chan, Y.L. Kogan, L. |
| Title: | Catching up with the Joneses: Heterogeneous preferences and the dynamics of asset prices |
| Journal: | Journal of Political Economy
2002 : DEC, VOL. 110:6, p. 1255-1285 |
| Index terms: | Share prices Risk Distribution of wealth Stock returns Models |
| Language: | eng |
| Abstract: | The article analyzes a general equilibrium exchange economy with a continuum of agents who have “catching up with the Joneses” preferences and differ only with respect to the curvature of their utility functions. While individual risk aversion does not change over time, dynamic redistribution of wealth among the agents leads to countercyclical time variation in the Sharpe ratio of stock returns. The article shows that both the conditional risk premium and the return volatility are negatively related to the level of stock prices. |
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