Equilibrium asset prices and bubbles in a continuous time OLG model

Brito, Paulo (2008): Equilibrium asset prices and bubbles in a continuous time OLG model.

Abstract

In a Yaari-Blanchard overlapping generations endowment economy, and drawing on the equivalence between Radner (R) and Arrow-Debreu (AD) equi- libria, we prove that equilibrium AD prices have an explicit representation as a double integral equation. This allows for an analytic characterization of the relationship between life-cycle and cohort heterogeneity and asset prices. For a simple distribution, we prove that bubbles may exist, and derive conditions for ruling them out.

• Item Type: MPRA Paper
• Language: English
• Keywords: overlapping generations, asset pricing, bubbles, integral equations, LambertW function
• Subjects: G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing ; Trading Volume ; Bond Interest Rates; D - Microeconomics > D5 - General Equilibrium and Disequilibrium > D51 - Exchange and Production Economies

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