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Asset Prices and Asset Quantities

Author

Listed:
  • Monika Piazzesi
  • Martin Schneider

Abstract

We propose an organizing framework that determines asset prices by equating household sector asset demand derived from an economic model to the observed supply of assets provided by other sectors. We then use a specific model of household asset demand to decompose historical changes in asset positions into changes in new asset supply and household income, as well as changes in return expectations. Our findings show that supply and income changes are important determinants of the wealth-to-GDP ratio and real estate positions, and return expectations are the key determinant of equity positions. (JEL: G11, G12, E44, E21) (c) 2007 by the European Economic Association.

Suggested Citation

  • Monika Piazzesi & Martin Schneider, 2007. "Asset Prices and Asset Quantities," Journal of the European Economic Association, MIT Press, vol. 5(2-3), pages 380-389, 04-05.
    • Handle: RePEc:tpr:jeurec:v:5:y:2007:i:2-3:p:380-389
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    Citations

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    Cited by:

    1. Favilukis, Jack, 2013. "Inequality, stock market participation, and the equity premium," Journal of Financial Economics, Elsevier, vol. 107(3), pages 740-759.
    2. Paolo Zagaglia, 2013. "Forecasting Long-Term Interest Rates with a General-Equilibrium Model of the Euro Area: What Role for Liquidity Services of Bonds?," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 20(4), pages 383-430, November.
    3. Paolo Zagaglia, 2011. "Forecasting Long-Term Interest Rates with a Dynamic General Equilibrium Model of the Euro Area: The Role of the Feedback," Working Paper series 19_11, Rimini Centre for Economic Analysis.
    4. Thomas B. King, 2013. "A Portfolio-Balance Approach to the Nominal Term Structure," Working Paper Series WP-2013-18, Federal Reserve Bank of Chicago.
    5. Nikolai Roussanov, 2010. "Diversification and Its Discontents: Idiosyncratic and Entrepreneurial Risk in the Quest for Social Status," Journal of Finance, American Finance Association, vol. 65(5), pages 1755-1788, October.
    6. Zagaglia, Paolo, 2009. "Forecasting with a DSGE Model of the term Structure of Interest Rates: The Role of the Feedback," Research Papers in Economics 2009:14, Stockholm University, Department of Economics.
    7. David Berger & Joseph Vavra, 2015. "Consumption Dynamics During Recessions," Econometrica, Econometric Society, vol. 83, pages 101-154, January.
    8. Marius Ascheberg & Robert A. Jarrow & Holger Kraft & Yildiray Yildirim, 2014. "Government Policies, Residential Mortgage Defaults and the Boom and Bust Cycle of Housing Prices," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 42(3), pages 627-661, September.

    More about this item

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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