Positive prices in CAPM
Author: Nielsen, Lars Tyge INSEAD Area: Finance Series: Working Paper ; 90/24/FIN/EPS Publisher: Fontainebleau : INSEAD, 1990.Language: EnglishDescription: 25 p.Type of document: INSEAD Working Paper Online Access: Click here Abstract: In the mean-variance capital asset pricing model (CAPM), some equilibrium prices may be negative because of non-monotonicity of preferences. Thispaper identifies several sets of sufficient conditions for prices to be positive. The nature of the central conditions to impose bounds on the investors' degree of risk aversion, as measured by the marginal rate of substitution between mean and standard deviation of return. These bounds do not need to hold globally but only in a relevant range of portfolios or combinations of mean and standard deviation of return. The relevant range is specified on the basis of exogenously given parameters and variables, and it is such that it must contain any endogenously determined equilibrium. The bounds on risk aversion ensure that the preferences for assets are sufficiently well-behaved within the relevant range| Item type | Current location | Collection | Call number | Status | Date due | Barcode | Item holds |
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Digital Library | Available | BC000790 |
In the mean-variance capital asset pricing model (CAPM), some equilibrium prices may be negative because of non-monotonicity of preferences. Thispaper identifies several sets of sufficient conditions for prices to be positive. The nature of the central conditions to impose bounds on the investors' degree of risk aversion, as measured by the marginal rate of substitution between mean and standard deviation of return. These bounds do not need to hold globally but only in a relevant range of portfolios or combinations of mean and standard deviation of return. The relevant range is specified on the basis of exogenously given parameters and variables, and it is such that it must contain any endogenously determined equilibrium. The bounds on risk aversion ensure that the preferences for assets are sufficiently well-behaved within the relevant range
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