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- Title
Heterogeneous Expectations, Restrictions on Short Sales, and Equilibrium Asset Prices.
- Authors
JARROW, ROBERT
- Abstract
Under heterogeneous expectations, the mean-variance model of capital market equilibrium is employed to determine the effect restricting short sales has on equilibrium asset prices. Two equivalent markets differing only with respect to short sale restrictions are compared. It is shown that, in general, risky asset prices can either rise or fall due to short sale constraints. However, under a homogeneity of beliefs for the covariance matrix of future prices, short sale constraints will only increase risky asset prices.
- Subjects
ECONOMIC equilibrium; CAPITAL market; FINANCIAL services industry; ASSETS (Accounting); FINANCIAL futures; MARKET equilibrium; ECONOMIC models; SHORT selling (Securities); RISK; CAPITAL assets pricing model; PORTFOLIO management (Investments); PRICES of securities; ECONOMICS
- Publication
Journal of Finance (Wiley-Blackwell), 1980, Vol 35, Issue 5, p1105
- ISSN
0022-1082
- Publication type
Article
- DOI
10.1111/j.1540-6261.1980.tb02198.x