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- Title
A CAPM WITH TRADING CONSTRAINTS AND PRICE BUBBLES.
- Authors
JARROW, ROBERT
- Abstract
This paper derives an equilibrium capital asset pricing model (CAPM) in a market with trading constraints and asset price bubbles. The asset price processes are general semimartingales including Markov jump-diffusion processes as special cases, and the trading constraints considered include short sale restrictions, borrowing constraints, and margin requirements, among others. We derive a generalized intertertemporal CAPM and consumption CAPM for these markets. The implications for empirical testing are that additional systematic risk factors will exist in a market with trading constraints and price bubbles as contrasted with an otherwise equivalent unconstrained market with no price bubbles.
- Subjects
CAPITAL assets pricing model; ECONOMIC bubbles; BOND market; MARKOV processes; MARGIN requirements; CONSUMPTION (Economics)
- Publication
International Journal of Theoretical & Applied Finance, 2017, Vol 20, Issue 8, p-1
- ISSN
0219-0249
- Publication type
Article
- DOI
10.1142/S0219024917500534