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Reply to: Asset Trading Volume in Infinite-Horizon Economies with Dynamically Complete Markets and Heterogeneous Agents: Comment, Finance Research Letters

Abstract

In a comment Peter Bossaerts and William R. Zame [2006, Asset Trading Volume in Infinite-Horizon Economies with Dynamically Complete Markets and Heterogeneous Agents: Comment, Finance Research Letters, this issue] claim that the main result of our paper [Judd, Kenneth L., Felix Kubler, and Karl Schmedders, 2003, Asset Trading Volume with Dynamically Complete Markets and Heterogeneous Agents, The Journal of Finance 58, 2203-2217], namely the no-trade theorem for the dynamic Lucas infinite horizon economy with heterogeneous agents, is an artifact of the assumption that asset dividends and individual endowments follow the same stationary finite-state Markov process. In this reply, we clarify our assumptions and contrast them with the examples in Bossaerts and Zame.

Type

Article

Author(s)

Kenneth L. Judd, Felix Kubler, Karl Schmedders

Date Published

2006

Citations

Judd, L. Kenneth, Felix Kubler, and Karl Schmedders. 2006. Reply to: Asset Trading Volume in Infinite-Horizon Economies with Dynamically Complete Markets and Heterogeneous Agents: Comment. Finance Research Letters. 3(2): 102-105.

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