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Market Demand Functions in the CAPM

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Author Info
Thorsten Hens
Andres L=EEffler
Abstract

We demonstrate that in a CAPM economy Walras Law and the Tobin Separation Property characterize market demand in finite sets of prices. Consequently, for any number n there exist CAPM economies which have at least n equilibria and hence have n different beta pricing fomulas. It is shown that the lower bound on the number of equilibria, n, is robust to pertubations of endowments.

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File URL: ftp://web.bgse.uni-bonn.de/pub/RePEc/bon/bonsfa/bonsfa468.ps
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Publisher Info
Paper provided by University of Bonn, Germany in its series Discussion Paper Serie A with number 468.

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Length: 15
Date of creation: Mar 1995
Date of revision:
Handle: RePEc:bon:bonsfa:468

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Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany
Fax: +49 228 73 9221
Web page: http://www.bgse.uni-bonn.de/index.php?id=517

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Related research
Keywords: CAPM; Market Demand; multiplicity of equilibria.;

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Find related papers by JEL classification:
C62 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Existence and Stability Conditions of Equilibrium
D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
G12 - Financial Economics - - General Financial Markets - - - Asset Pricing

References listed on IDEAS
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  1. Koch, Karl-Josef, 1989. "Mean demand when consumers satisfy the weak axiom of revealed preference," Journal of Mathematical Economics, Elsevier, vol. 18(4), pages 347-356, September. [Downloadable!] (restricted)
    Other versions:
  2. James Tobin, 1956. "Liquidity Preference as Behavior Towards Risk," Cowles Foundation Discussion Papers 14, Cowles Foundation, Yale University. [Downloadable!]
  3. Chiappori, Pierre-Andre & Rochet, Jean-Charles, 1987. "Revealed Preferences and Differentiable Demand: Notes and Comments," Econometrica, Econometric Society, vol. 55(3), pages 687-91, May. [Downloadable!] (restricted)
  4. Nielsen, Lars Tyge, 1988. "Uniqueness of Equilibrium in the Classical Capital Asset Pricing Model," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 23(03), pages 329-336, September. [Downloadable!]
  5. Andreu, Jordi, 1982. "Rationalization of market demand on finite domains," Journal of Economic Theory, Elsevier, vol. 28(1), pages 201-204, October. [Downloadable!] (restricted)
  6. Nielsen, Lars Tyge, 1990. "Existence of equilibrium in CAPM," Journal of Economic Theory, Elsevier, vol. 52(1), pages 223-231, October. [Downloadable!] (restricted)
  7. Black, Fischer, 1972. "Capital Market Equilibrium with Restricted Borrowing," Journal of Business, University of Chicago Press, vol. 45(3), pages 444-55, July. [Downloadable!] (restricted)
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