We solve in closed-form an equilibrium model in which a finite number of exponential investors continuously consume and trade with price-impact. By comparing our continuous-time price-impact equilibrium model to the analogous Pareto efficient equilibrium model, we show that our model can simultaneously help resolve the interest rate puzzle , the equity premium puzzle, and the stock-price volatility  puzzle.
We solve in closed-form an equilibrium model in which a finite number of exponential investors continuously consume and trade with price-impact. Compared to the analogous Pareto-efficient equilibrium model, price-impact has an amplification effect on risk-sharing distortions that helps resolve the interest rate puzzle and the stock-price volatility puzzle and, to a lesser extent, affects the equity premium puzzle.
R
By comparing our continuous-time price-impact equilibrium model
Compared
R
Pareto efficient
Pareto-efficient
R
we show that our model can simultaneously help
price-impact has an amplification effect on risk-sharing distortions that helps
D
, the equity premium puzzle,
A
puzzle and, to a lesser extent, affects the equity premium