We measure the extent to which the cyclical behavior of the turnover of equity shares generated by individual investors on the New York Stock Exchange can be accounted for by a single source of trade embedded in a neoclassical growth economy with dynamically complete markets. The source of trade is heterogene- ity in agents’ financial wealth. In the post-war United States, turnover has been more than seven times as volatile as output and has exhibited asynchronous cycli- cal characteristics: lagged turnover has co-varied positively with output and led turnover negatively. The baseline model, calibrated to match the mean behavior of asset returns and the distribution of wealth across households, accounts for 29% of the level of turnover observed in the data and 22% of the volatility. The asynchronous relationship observed between turnover and output is puzzling. Keywords. Asset trade, dynamically complete markets, time- and wealth-varying risk aversion, production economies. JEL classification. E32, G12.
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- Publication year
2011
- Venue
Quantitative Economics
- Publication date
2011-03-01
- Fields of study
Economics
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Semantic Scholar
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