Complex stock price dynamics under Max Weber’s spirit of capitalism hypothesis

Airaudo, Marco

doi:10.1007/s00199-016-0969-0

Cited by 8 publications

(6 citation statements)

References 57 publications

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“…Several theoretical studies also claim that preferences for wealth are useful for understanding asset price behaviour (see Bakshi and Chen (1996), Smith (2001), Boileau and Braeu (2007)). This paper is in line with this latter branch of the literature, and is closely related to Kamihigashi (2008) and Airaudo (2017), which highlight the role of preferences for wealth in the occurrence of expectation-driven asset price fluctuations in a representative agent framework.…”

Section: Introductionsupporting

confidence: 75%

“…I focus on the spirit of capitalism (henceforth, SOC) hypothesis developed by Weber (1905), which captures the intrinsic desire for wealth accumulation. 1 Following Zou (1994Zou ( , 1995, I introduce SOC hypothesis through preferences for wealth, and consider a non-seperable utility function between consumption and wealth holdings. Several empirical studies about the saving behaviour of top income households in the United States support the existence of wealth preferences (see Carroll (2000), Dynan et al (2004), Kumhof et al (2015)).…”

Section: Introductionmentioning

confidence: 99%

“…The main contribution of this paper with respect to Kamihigashi (2008) and Airaudo (2017) is to investigate the role of heterogeneity on the occurrence of expectation-driven asset price fluctuations when agents derive preferences for wealth. This paper is also related to the literature about heterogeneous agents and asset pricing.…”

Section: Introductionmentioning

confidence: 99%

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Expectation-Driven Asset Price Fluctuations Under the Spirit of Capitalism Hypothesis: The Role of Heterogeneity

Clain-Chamosset-Yvrard

2018

SSRN Journal

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In this paper, I study how heterogeneity amongst agents affects the occurrence of expectation-driven asset price fluctuations in a pure exchange economy à la Lucas, with infinitely-lived households, under the hypothesis of spirit of capitalism. I consider heterogeneous households in terms of preferences, endowments and initial wealth, and capture the spirit of capitalism through preferences for wealth. Preferences for wealth are the key element of this paper in a twofold aspect. First, they explain the occurrence of asset price fluctuations driven by self-fulfilling changes in expectations. Second, heterogeneity in endowments affects asset price level and dynamics only if preferences are heterogeneous. For instance, if agents with the strongest spirit of capitalism are also the rich in terms of endowments, heterogeneity in endowments heightens the asset price level in the long run, and destabilizes by enlarging the range of parameter values for which expectation-driven asset price fluctuations occur.

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Section: Introductionsupporting

confidence: 75%

Section: Introductionmentioning

confidence: 99%

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Expectation-Driven Asset Price Fluctuations Under the Spirit of Capitalism Hypothesis: The Role of Heterogeneity

Clain-Chamosset-Yvrard

2018

SSRN Journal

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“…In Section 2, we brie ‡y motivate the preference for 9 There has recently been a rising interest in macroeconomics for the monetary policy consequences of bubbles (Gali 2014(Gali , 2017 In many of these papers, especially those relying on an OLG structure, the dimensions of heterogeneity necessary to generate a rational bubble are largely orthogonal to the issue of monetary policy under investigation. 10 Relying on parametric examples within an endowment economy, Airaudo (2017) showed that, without additive separability, the preference for wealth can generate extremely complex, and even chaotic, asset price dynamics.…”

Section: Introductionmentioning

confidence: 99%

Wealth Preference and Rational Bubbles

2018

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We consider a neoclassical economy where households derive utility from holding wealth. We show that, under some conditions, there can be rational bubbles.Hence, we provide a microfoundation for bubbles that relies on a frictionless in…nitehorizon economy without any heterogeneity across households. While our bubbly equilibria are very similar to those obtained by Tirole (1985) in an overlapping generation economy, the underlying economics is di¤erent. Turning to public debt, we show that Ponzi schemes can be sustainable. Hence, in general, the limit on the accumulation of public debt by the government is not given by its no-Ponzi condition but, instead, by the representative household's transversality condition. The Ricardian equivalence must hold in any of our equilibria. Finally, in the presence of money, the real equilibrium structure of the economy remains unchanged. We carefully investigate the e¤ects of helicopter drops of money on the possibility of Ponzi schemes and of speculative hyperin ‡ation or de ‡ation.

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“…But, this equivalence breaks down when households have a preference for wealth. 3 This makes it possible to obtain a steady state equilibrium that violates the government's no-Ponzi condition. However, in such cases, there must also exist an equilibrium where households do not want to lend to the government beyond its no-Ponzi condition.…”

Section: Introductionmentioning

confidence: 99%