Asset pricing with dynamic margin constraints

• Autores: Oleg Rytchkov
• Localización: The Journal of finance, ISSN 0022-1082, Vol. 69, Nº 1, 2014, págs. 405-452
• Idioma: inglés
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• Resumen

  • This paper provides a novel theoretical analysis of how endogenous time-varying margin requirements affect capital market equilibrium. I find that margin requirements, when there are no other market frictions, reduce the volatility and correlation of returns as well as the risk-free rate, but increase the market price of risk, the risk premium, and the price of risky assets. Furthermore, margin requirements generate a strong cross-sectional dispersion of stock return volatilities. The results emphasize that a general equilibrium analysis may reverse the conclusions of a partial equilibrium analysis often employed in the literature.