PORTFOLIO SELECTION AND THE STRUCTURE OF CAPITAL ASSET PRICES WHEN RELATIVE PRICES OF CONSUMPTION GOODS MAY CHANGE

1972 ◽  
Vol 27 (1) ◽  
pp. 47-60 ◽  
Author(s):  
Donald G. Heckerman
Keyword(s):  
Portfolio Selection ◽  
Asset Prices ◽  
Capital Asset ◽  
Relative Prices ◽  
Consumption Goods

scholarly journals Coherent-Price Systems and Uncertainty-Neutral Valuation

Risks ◽  
2019 ◽  
Vol 7 (3) ◽  
pp. 98
Author(s):  
Patrick Beissner
Keyword(s):  
Economic Theory ◽  
Brownian Motion ◽  
Asset Pricing ◽  
Asset Prices ◽  
Martingale Measure ◽  
Capital Asset Pricing ◽  
Securities Markets ◽  
Capital Asset ◽  
Uncertainty Model ◽  
Economic Foundation

This paper considers fundamental questions of arbitrage pricing that arises when the uncertainty model incorporates ambiguity about risk. This additional ambiguity motivates a new principle of risk- and ambiguity-neutral valuation as an extension of the paper by Ross (1976) (Ross, Stephen A. 1976. The arbitrage theory of capital asset pricing. Journal of Economic Theory 13: 341–60). In the spirit of Harrison and Kreps (1979) (Harrison, J. Michael, and David M. Kreps. 1979. Martingales and arbitrage in multiperiod securities markets. Journal of Economic Theory 20: 381–408), the paper establishes a micro-economic foundation of viability in which ambiguity-neutrality imposes a fair-pricing principle via symmetric multiple prior martingales. The resulting equivalent symmetric martingale measure set exists if the uncertain volatility in asset prices is driven by an ambiguous Brownian motion.

ON CAPITAL ASSET PRICES: COMMENT

1965 ◽  
Vol 20 (1) ◽  
pp. 89-93 ◽  
Author(s):  
G. O. Bierwag ◽  
M. A. Grove
Keyword(s):  
Asset Prices ◽  
Capital Asset

scholarly journals Consumption composition and macroeconomic dynamics

2015 ◽  
Vol 15 (1) ◽  
pp. 1-42 ◽  
Author(s):  
Jaime Alonso-Carrera ◽  
Jordi Caballé ◽  
Xavier Raurich
Keyword(s):  
Welfare Cost ◽  
Elasticity Of Substitution ◽  
Growth Effect ◽  
Consumption Expenditure ◽  
Transitional Dynamics ◽  
Dynamic Adjustment ◽  
Macroeconomic Dynamics ◽  
Relative Prices ◽  
Heterogeneous Consumption ◽  
Consumption Goods

AbstractWe analyze the transitional dynamics of an economic model with heterogeneous consumption goods where convergence is driven by two different forces: the typical diminishing returns to capital and the dynamic adjustment in consumption expenditure induced by the variation in relative prices. We show that this second force affects the growth rate if the consumption goods are produced with technologies exhibiting different capital intensities and if the intertemporal elasticity of substitution is not equal to one. Because the aforementioned growth effect of relative prices arises only under heterogeneous consumption goods, the transitional dynamics of this model exhibits striking differences with the growth model with a single consumption good. We also show that these differences in the transitional dynamics can give raise to large discrepancies in the welfare cost of shocks.

scholarly journals Extension of the Capital Asset Pricing Model to Non-normal Dependence Structures

2007 ◽  
Vol 37 (1) ◽  
pp. 35-52
Author(s):  
Mark Johnston
Keyword(s):  
Asset Pricing ◽  
Asset Prices ◽  
Capital Asset Pricing ◽  
Pricing Model ◽  
Capital Asset ◽  
Marginal Distributions ◽  
Asset Pricing Model ◽  
Discount Factors ◽  
Stochastic Discount Factors ◽  
Normal Copula

The Capital Asset Pricing Model arises in an economy where agents have exponential utility functions and aggregate consumption is normally distributed, and gives the prices of assets with payoffs which are jointly normal with consumption. Such assets have normal marginal distributions and have dependence with consumption characterised by a normal copula. Wang has derived a transform which extends the CAPM by allowing pricing of assets in such an economy which have non-normal marginal distributions but still are normal-copula with consumption.Here we set out the stochastic discount factors corresponding to this version of the CAPM and to Wang’s transform, and show how to calculate stochastic discount factors and hence asset prices for assets whose dependence with consumption is non-normal. We show that the impact of dependency structure on asset prices is significant.

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