Reallocating and pricing illiquid capital

@inproceedings{Eberly2008ReallocatingAP,
  title={Reallocating and pricing illiquid capital},
  author={J Patrick Eberly and Neng Wang},
  year={2008}
}
Firm-level and sectoral heterogeneity is pervasive in data. Equilibrium models in macro and finance typically assume a representative firm, as in Cochrane (1991). This representative firm paradigm leaves no role for the distribution of capital. We jointly model capital reallocation and asset pricing in a general equilibrium model with two sectors. Existing multisector equilibrium models assume either that capital is perfectly liquid and can be reallocated frictionlessly, as in Cox, Ingersoll… CONTINUE READING
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