A note on the existence of CAPM equilibria with homogeneous cumulative prospect theory preferences

This note identifies and fixes a minor gap in Proposition 1 in Barberis and Huang (Am Econ Rev 98(5):2066–2100, <CitationRef CitationID="CR2">2008</CitationRef>). Assuming homogeneous cumulative prospect theory decision makers, we show that CAPM is a necessary (though not sufficient) condition that must hold in equilibrium. We support our results with numerical examples where security prices become negative. Copyright Springer-Verlag Italia 2014

MoreLess

Year of publication:	2014
Authors:	Vigna, Matteo Del
Published in:	Decisions in Economics and Finance. - Springer, ISSN 1593-8883. - Vol. 37.2014, 2, p. 341-348
Publisher:	Springer
Subject:	Asset pricing \| Capital asset pricing model \| Cumulative prospect theory

More details

Extent:	text/html
Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010993485