Asset prices and liquidity in an exchange economy

Ricardo Lagos

doi:10.1016/j.jmoneco.2010.10.006

Asset prices and liquidity in an exchange economy

Ricardo Lagos

Research output: Contribution to journal › Article › peer-review

Abstract

An asset-pricing model is developed, in which financial assets are valued for their liquidity-the extent to which they are useful in facilitating exchange-as well as for being claims to streams of consumption goods. The theory is used to study the implications of this liquidity channel for average asset returns, the equity-premium puzzle and the risk-free rate puzzle.

Original language	English (US)
Pages (from-to)	913-930
Number of pages	18
Journal	Journal of Monetary Economics
Volume	57
Issue number	8
DOIs	https://doi.org/10.1016/j.jmoneco.2010.10.006
State	Published - Nov 2010

ASJC Scopus subject areas

Finance
Economics and Econometrics

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@article{6ac70e28daf44a369265179cc78a6d4b,

title = "Asset prices and liquidity in an exchange economy",

abstract = "An asset-pricing model is developed, in which financial assets are valued for their liquidity-the extent to which they are useful in facilitating exchange-as well as for being claims to streams of consumption goods. The theory is used to study the implications of this liquidity channel for average asset returns, the equity-premium puzzle and the risk-free rate puzzle.",

author = "Ricardo Lagos",

note = "Funding Information: I am indebted to Ellen McGrattan and Fabrizio Perri for many helpful conversations at various stages. I am grateful to Nobu Kiyotaki for his feedback as a discussant at the Princeton–NY Fed Conference on Liquidity and the Philadelphia Workshop on Monetary and Macroeconomics. I thank V.V. Chari, Mark Gertler, Patrick Kehoe, Narayana Kocherlakota, Hanno Lustig, Erzo G.J. Luttmer, Monika Piazzesi, Ed Prescott, Guillaume Rocheteau, Tom Sargent, Martin Schneider, Pierre-Olivier Weill, Michael Woodford, and Randy Wright for their input. I also thank Katya Kartashova for many useful comments on previous drafts. Daniil Manaenkov, Carlos Serrano, and Jing Zhang provided research assistance. Financial support from the C.V. Starr Center for Applied Economics at NYU is gratefully acknowledged. ",

year = "2010",

month = nov,

doi = "10.1016/j.jmoneco.2010.10.006",

language = "English (US)",

volume = "57",

pages = "913--930",

journal = "Journal of Monetary Economics",

issn = "0304-3932",

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