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| Author: | Basak, S. Cuoco, D. |
| Title: | An equilibrium model with restricted stock market participation |
| Journal: | Review of Financial Studies
1998 : SUMMER, VOL. 11:2, p. 309-342 |
| Index terms: | FINANCE EQUILIBRIUM THEORY STOCK MARKETS |
| Language: | eng |
| Abstract: | This article solves the equilibrium problem in a pure exchange, continuous-time economy in which some agents face information costs or other types of frictions effectively preventing them from investing in the stock market. Under the assumption that the restricted agents have logarithmic utilities, a complete characterization of equilibrium prices and consumption/investment policies is provided. A simple calibration shows that the model can help resolve some of the empirical asset pricing puzzles. |
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