Published in:Chicago Booth Research Paper ; No. 16-22
Extent:
1 Online-Ressource (55 p)
Language:
English
DOI:
10.2139/ssrn.2876850
Identifier:
Origination:
Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments June 7, 2017 erstellt
Description:
Many stylized facts of leverage, trading, and asset prices obtain in a frictionless general equilibrium model that features agents' heterogeneity in endowments and habit preferences. Our model predicts that aggregate debt increases in expansions when asset prices are high, volatility is low, and levered agents enjoy a "consumption boom." Our model is consistent with poorer agents borrowing more and with intermediaries' leverage being a priced factor. In crises, levered agents strongly deleverage by "fire selling" their risky assets as asset prices drop. Yet, consistently with the data, their debt-to-wealth ratios increase as higher discount rates make their wealth decline faster