Capm Risk Adjustment For Exact Aggregation Over Financial Assets

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Capm Risk Adjustment For Exact Aggregation Over Financial Assets

Author Info

BARNETT, WILLIAM A.
LIU, YI
JENSEN, MARK

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Abstract

Barnett originated the Divisia monetary aggregates, which incontinuous time exactly track any monetary aggregator function underperfect certainty. With user costs measuring the prices of theservices of components, Barnett s aggregates are based on FrancoisDivisia s derivation of the Divisia line integral from thefirst-order conditions for optimizing behavior by economic agentsunder perfect certainty. We derive an extended Divisia index fromthe first-order conditions (Euler equations) that apply under risk.Our extended Divisia index is the first extension of index numbertheory into the domain of decision making under risk and therebyproduces a route for the extension of all index number theory topermit non-risk-neutrality. We generate simulated data from amodeled rational consumer and investigate the tracking accuracy ofthe extended Divisia index to the consumer s exact aggregatorfunction.

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Publisher Info
Article provided by Cambridge University Press in its journal Macroeconomic Dynamics.

Volume (Year): 1 (1997)
Issue (Month): 02 (June)
Pages: 485-512
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Handle: RePEc:cup:macdyn:v:1:y:1997:i:02:p:485-512_00

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Barnett, William A. & Chauvet, Marcelle, 2008. "International Financial Aggregation and Index Number Theory: A Chronological Half-Century Empirical Overview," MPRA Paper 10242, University Library of Munich, Germany, revised 04 Sep 2008. [Downloadable!]
Other versions:
- William Barnett & Marcelle Chauvet, 2008. "International Financial Aggregation and Index Number Theory: A Chronological Half-Century Empirical Overview," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 200804, University of Kansas, Department of Economics, revised Sep 2008. [Downloadable!]
- William Barnett & Marcelle Chauvet, 2009. "International Financial Aggregation and Index Number Theory: A Chronological Half-century Empirical Overview," Open Economies Review, Springer, vol. 20(1), pages 1-37, February. [Downloadable!] (restricted)
Barnett, William & Keating, John & Kelly, Logan, 2007. "Toward a Bias Corrected Currency Equivalent Index," MPRA Paper 4786, University Library of Munich, Germany. [Downloadable!]
Other versions:
- Barnett, William A. & Keating, John W. & Kelly, Logan, 2007. "Toward a Bias Corrected Currency Equivalent Index," MPRA Paper 6008, University Library of Munich, Germany. [Downloadable!]
- William Barnett & John Keating & Logan Kelly, 2007. "Toward a Bias Corrected Currency Equivalent Index," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 200707, University of Kansas, Department of Economics, revised Nov 2007. [Downloadable!]
- Barnett, William A. & Keating, John W. & Kelly, Logan J., 2008. "Toward a bias corrected currency equivalent index," Economics Letters, Elsevier, vol. 100(3), pages 448-451, September. [Downloadable!] (restricted)
Travis D. Nesmith, 2005. "Solving stochastic money-in-the-utility-function models," Finance and Economics Discussion Series 2005-52, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
Richard G. Anderson & Jason Buol, 2005. "Revisions to user costs for the Federal Reserve Bank of St. Louis monetary services indices," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 735-50. [Downloadable!]
Kelly, Logan, 2007. "Measuring the Economic Stock of Money," MPRA Paper 4914, University Library of Munich, Germany. [Downloadable!]
Barnett, William A. & Chauvet, Marcelle & Tierney, Heather L. R., 2007. "Measurement Error in Monetary Aggregates: A Markov Switching Factor Approach," MPRA Paper 10150, University Library of Munich, Germany, revised 06 Aug 2008. [Downloadable!]
Other versions:
- William Barnett & Marcelle Chauvet & Heather L. R. Tierney, 2007. "Measurement Error in Monetary Aggregates: A Markov Switching Factor Approach," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 200706, University of Kansas, Department of Economics, revised Aug 2008. [Downloadable!]
- Barnett, William A. & Chauvet, Marcelle & Tierney, Heather L. R., 2008. "Measurement Error in Monetary Aggregates: A Markov Switching Factor Approach," MPRA Paper 10179, University Library of Munich, Germany. [Downloadable!]
- Barnett, William A. & Chauvet, Marcelle & Tierney, Heather L. R., 2007. "Measurement Error in Monetary Aggregates: A Markov Switching Factor Approach," MPRA Paper 5770, University Library of Munich, Germany. [Downloadable!]
- Barnett, William A. & Chauvet, Marcelle & Tierney, Heather L. R., 2009. "Measurement Error In Monetary Aggregates: A Markov Switching Factor Approach," Macroeconomic Dynamics, Cambridge University Press, vol. 13(S2), pages 381-412, September. [Downloadable!]

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