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Annual Review of Financial Economics

Volume 16, 2024

Comparative Valuation Dynamics in Production Economies: Long-Run Uncertainty, Heterogeneity, and Market Frictions

Abstract

We compare and contrast production economies exposed to long-run uncertainty with investors that have possibly different preferences and/or access to financial markets. We study the macroeconomic and asset-pricing properties of these models, identify common features, and highlight areas where these models depart from each other. Our framework allows us to investigate more fully the impact of investor heterogeneity, capital heterogeneity, and fluctuations of the growth components to the capital evolution as they affect the dynamics of macroeconomic quantities and asset prices. In our comparisons, we employ an array of diagnostic tools to explore time variation and state dependencies in nonlinear environments.

Keyword(s): asset pricing, diversification, heterogeneous agents, JEL C68, JEL D45, JEL D53, JEL D81, JEL G12, long-run uncertainty, market frictions, robustness

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Erratum: Comparative Valuation Dynamics in Production Economies: Long-Run Uncertainty, Heterogeneity, and Market Frictions
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2024-11-01
2025-04-23
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Comparative Valuation Dynamics in Production Economies: Long-Run Uncertainty, Heterogeneity, and Market Frictions
Annual Review of Financial Economics 16, 1 (2024); https://doi.org/10.1146/annurev-financial-082123-105652
/content/journals/10.1146/annurev-financial-082123-105652
/content/journals/10.1146/annurev-financial-082123-105652
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