We measure the extent to which the cyclical behavior of the turnover of equity
shares generated by individual investors on the New York Stock Exchange can
be accounted for by a single source of trade embedded in a neoclassical growth
economy with dynamically complete markets. The source of trade is heterogene-
ity in agents’ financial wealth. In the post-war United States, turnover has been
more than seven times as volatile as output and has exhibited asynchronous cycli-
cal characteristics: lagged turnover has co-varied positively with output and led
turnover negatively. The baseline model, calibrated to match the mean behavior
of asset returns and the distribution of wealth across households, accounts for
29% of the level of turnover observed in the data and 22% of the volatility. The
asynchronous relationship observed between turnover and output is puzzling.
Keywords. Asset trade, dynamically complete markets, time- and wealth-varying
risk aversion, production economies.
JEL classification. E32, G12.