Asset Pricing with Heterogeneous Intermediaries

Economie et Sciences de la décision

Intervenant : François Geerolf 
UCLA

HEC Campus - Bât.T - Salle T004

I propose an asset pricing model based on heterogeneity and scarcity of financial expertise. This corporate-finance view of asset pricing has several predictions in common with intermediary-based asset pricing, but also has several distinguishing features. First, the model microfounds intermediaries’ technologies explicitly, in line with textbook models of corporate finance and financial frictions; it applies even if intermediaries are risk neutral. Second, expected returns do not just correlate with intermediaries’ wealth, but also with borrowers’ wealth, intermediaries’ heterogeneity and borrowers’ heterogeneity. Third, identical securities in the sense of Arrow-Debreu may have different prices, opening arbitrage opportunities from the econometrician’s point of view. Applications of the model to different market settings where financial expertise is key are then discussed: private equity, venture capital, syndicated loans, mutual funds. Finally, the theory is related to earlier evidence previously put forward in favor of intermediary-based asset pricing.