Conditions for a CAPM equilibrium with positive prices

• 成果类型: Article
• 署名作者: Levy, Moshe
• 署名单位: Hebrew University of Jerusalem; University of California System; University of California Los Angeles
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2007.01.004
• 发表日期: 2007
• 页码: 404-415
• 关键词: capital asset pricing model; positive prices; equity premium; segmented market

摘要

This paper examines the conditions required to guarantee positive prices in the CAPM. Positive prices imply an upper bound on the equity premium. This upper bound depends on the degree of diversity of firms' fundamentals, and it is independent of investors' preferences. In economies with realistically diverse assets the only positive-price CAPM equilibrium theoretically possible is a degenerate one, with zero equity premium. Furthermore, when specific standard investors' preferences are assumed, the CAPM equilibrium with positive prices may be altogether impossible. A possible solution to these fundamental problems may be offered by the segmented-market version of the model. (c) 2007 Elsevier Inc. All rights reserved.