蝌蚪网 Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Intermediary Asset Pricing
蝌蚪网 Review
vol. 103,
no. 2, April 2013
(pp. 732–70)
Abstract
We model the dynamics of risk premia during crises in asset markets where the marginal investor is a financial intermediary. Intermediaries face an equity capital constraint. Risk premia rise when the constraint binds, reflecting the capital scarcity. The calibrated model matches the nonlinearity of risk premia during crises and the speed of reversion in risk premia from a crisis back to precrisis levels. We evaluate the effect of three government policies: reducing intermediaries borrowing costs, injecting equity capital, and purchasing distressed assets. Injecting equity capital is particularly effective because it alleviates the equity capital constraint that drives the model's crisis. (JEL E44, G12, G21, G23, G24)Citation
He, Zhiguo, and Arvind Krishnamurthy. 2013. "Intermediary Asset Pricing." 蝌蚪网 Review 103 (2): 732–70. DOI: 10.1257/aer.103.2.732Additional Materials
JEL Classification
- E44 Financial Markets and the Macroeconomy
- G12 Asset Pricing; Trading volume; Bond Interest Rates
- G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- G23 Pension Funds; Non-bank Financial Institutions; Financial Instruments; Institutional Investors
- G24 Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies