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

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.