Aggregation, efficiency and mutual fund separation in incomplete markets
AbstractThis paper studies the conditions for aggregation, portfolio separation and effective completeness of competitive allocations in general equilibrium models with incomplete markets where agents have general preference and endowment distributions. We show that these properties are distinct. Demands may aggregate yet may fail to exhibit fund separation and conversely. Fund separation implies effective completeness while aggregation does not. The implications of these properties for the structure of equilibria are discussed, and generalizations of the CAPM, the consumption CAPM and the CAPM with nonmarketed wealth emerge from the analysis.
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Bibliographic InfoArticle provided by Springer in its journal Economic Theory.
Volume (Year): 11 (1998)
Issue (Month): 2 ()
Note: Received: September 12, 1996; revised version: November 7, 1996
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Web page: http://link.springer.de/link/service/journals/00199/index.htm
Other versions of this item:
- Jérôme B. Detemple & Piero Gottardi, 1997. "Aggregation, Efficiency and Mutual Fund Separation in Incomplete Markets," CIRANO Working Papers 97s-11, CIRANO.
- D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
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