Research

Macro-Financial Trends in a Model with Concentrated Ownership of Capital (new draft coming soon)

Abstract: This paper investigates the macroeconomic and asset-pricing consequences of the recent rise in the U.S. stock market participation rate. In a two-agent general equilibrium model where households feature non-homothetic preferences, the equity premium and stock market volatility rise with the participation rate. Concurrently, the risk-free rate and consumption volatility decline. The results rationalize the opposite trends in the safe rate and equity premium observed during the Great Moderation. In the model, more widespread participation commands a higher price of risk. Household-level evidence from the U.S. Consumer Expenditure Survey supports this novel risk-aversion channel of participation.

Presented at: EEA 2024 (scheduled), Sailing the Macro Workshop 2023, AMSE-BdF Workshop 2023, T2M 2023, AMSE-IMéRA Conference 2022, RES 2022, Bank of Italy, University of Milan, AMSE, ASSET 2021, IFABS 2021, IYFS 2021, SNDE 2020, University of Copenhagen, WBS, Warwick Macro & International Workshop.

Asset Market Participation, Redistribution, and Asset Pricing, with Ivan Petrella and Emiliano Santoro (updated, December 2023) [CEPR DP n.17984]

Abstract: The dynamics of consumption inequality is important to understand asset pricing and its connection with the macroeconomy. We document marked heterogeneity in the transmission of different aggregate shocks to the consumption (and income) of U.S. assetholders relative to that of non-assetholders. Unlike technology shocks, factor-share shocks that redistribute resources from labor to capital income generate strong procyclicality in relative consumption, and are relevant drivers of time-variation in expected stock returns. A limited participation model rationalizing these findings highlights that asset prices mostly reflect risk stemming from redistribution between different income sources, which however has limited influence on macroeconomic fluctuations.

Presented at: MMF 2024 (scheduled), CEPR and Liverpool Workshop in Macroeconomics 2024, T2M 2024, SED 2023, Université de Lausanne*, RES 2023, AMSE, ASSET 2022*, ICMAIF 2022, ADRES 2022, Macroeconomic Dynamics Workshop 2021*, King's Macroeconometrics Workshop 2021*, Sailing the Macro Workshop 2021, University of Pavia*, WBS, Warwick Macro & International Workshop.

(*Presented by co-author)

Consumption Dynamics with Direct and Indirect Stock-Ownership