Under the assumptions of the Consumption-based Capital Asset Pricing Model (CCAPM), Pareto optimal consumption allocations are characterized by each agent's consumption process being adapted to the filtration generated by the aggregate consumption process of the economy. The wealth processes of...

In a finite time horizon, incomplete market, continuous-time setting with dividends and investor incomes governed by arithmetic Brownian motions, we derive closed-form solutions for the equilibrium risk-free rate and stock price for an economy with a finite set of heterogeneous CARA investors...

This paper examines communication in a two-period principal/agent model in which the agent receives a private signal about the second outcome before the first outcome is realized. No communication is compared with communication at three possible dates: before the first outcome (early), at the...

We review and critically examine the standard approach to equity valuation using a constant risk-adjusted cost of capital, and we develop a new valuation approach discounting risk-adjusted fundamentals, such as expected free cash flows and residual operating income, using nominal zero-coupon...