Asset pricing implications of a New Keynesian model

Trading Volume: Implications of An Intertemporal Capital Asset Pricing Model

We derive an intertemporal capital asset pricing model with multiple assets and heterogeneous investors, and explore its implications for the behavior of trading volume and asset returns. Assets contain two types of risks: market risk and the risk of changing market conditions. We show that investors trade only in two portfolios: the market portfolio, and a hedging portfolio, which allows them ...

Dichotomous Asset Pricing Model

Cross-asset derivative securities are studied and a dichotomous asset pricing model (DAPM) is derived that significantly enriches the Sharpe-Lintner-Black capital asset pricing model. An assets beta is shown to be observable ex ante through the price of its cross-market call or put, and the DAPM separately predicts the assets’ expected return beta relations under the upper-market and lower-mark...

Asset Pricing Implications of Social Networks∗

Recent empirical studies suggest that social networks, according to which communication takes place, have a significant impact on traders’ financial decisions. Motivated by this evidence, we propose an asset pricing model in which agents communicate information according to a social network. In the proposed model, agents initially have imperfect and diverse information about the asset payoff st...

A Behavioral New Keynesian Model

This paper presents a framework for analyzing how bounded rationality a↵ects monetary and fiscal policy. The model is a tractable and parsimonious enrichment of the widely-used New Keynesian model – with one main new parameter, which quantifies how poorly agents understand future policy and its impact. That myopia parameter, in turn, a↵ects the power of monetary and fiscal policy in a microfoun...

The New Keynesian Model