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Asset Prices and Consumption in a Model of Perpetual Youth

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  • Stefano G. Athanasoulis

    (University of Notre Dame)

Abstract

I construct a general equilibrium overlapping generations model with heterogeneous agents and obtain analytical solutions to asset prices, consumption, and asset demands. Individuals have constant absolute risk aversion and a constant probability of dying. Agents have three stages in their lives. In the first stage, agents are young and constrained from investing in stocks. In the second stage they work, and in the third they retire. I analyze asset prices numerically and with comparative statics. Changing any exogenous parameter has large effects on asset prices when there are large demographic changes to the population constrained from investing in stocks.

Suggested Citation

  • Stefano G. Athanasoulis, 2006. "Asset Prices and Consumption in a Model of Perpetual Youth," The Journal of Business, University of Chicago Press, vol. 79(6), pages 2835-2868, November.
    • Handle: RePEc:ucp:jnlbus:v:79:y:2006:i:6:p:2835-2868
    DOI: 10.1086/508001
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    Cited by:

    1. Campbell, John Y. & Nosbusch, Yves, 2007. "Intergenerational risksharing and equilibrium asset prices," Journal of Monetary Economics, Elsevier, vol. 54(8), pages 2251-2268, November.
    2. Huang, Rachel J. & Miao, Jerry C.Y. & Tzeng, Larry Y., 2013. "Does mortality improvement increase equity risk premiums? A risk perception perspective," Journal of Empirical Finance, Elsevier, vol. 22(C), pages 67-77.

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