Finance Brown Bag Seminar
Speaker: Eduard Dubin (Goethe University Frankfurt)
Title: The Parsimonious Macroeconomic Model: The Role of Firm-Ownership and Heterogeneity for Asset Pricing and Macroeconomics
Abstract: I study and quantify the role of firm ownership and investors' heterogeneity on macroeconomic and asset pricing quantities in a complete market. Surprisingly, different assumptions about the firm's pricing kernel do not affect macroeconomic quantities. However, the characteristics of the firm owner pass on into the firm's stochastic discount factor and thus into its optimization problem. It follows that individual consumption patterns and the stochastic discount factor of the economy adjust. This has implications for asset pricing moments. In summary, I find that the equilibrium is not symmetric with respect to heterogeneity as it would be in an exchange economy. Based on Dumas-Lyasoff's time shift, I further develop a recursive numerical scheme to solve macroeconomic models with capital adjustment costs, leverage, labor, investors' heterogeneity, financial markets - in which risky assets are traded - and I allow for non-standard preferences. The felicity function is taken from Greenwood, Hercowitz, and Huffman (1988) and is nested into the Epstein-Zin aggregator.