Valuation and asset pricing in infinite-horizon sequential markets with portfolio constraints
AbstractWe develop a theory of valuation of payoff streams in infinite-horizon sequential markets and discuss implications of this theory for equilibrium under various portfolio constraints. We study the nature of asset price bubbles in light of this theory. We show that there cannot be equilibrium price bubbles on asset in positive net supply under a transversality restriction. Our analysis extends the work by Huang and Werner  to stochastic settings with complete or incomplete markets.
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Bibliographic InfoPaper provided by Utah State University, Department of Economics in its series Working Papers with number 2000-09.
Length: 29 pages
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Valuation; asset price bubble; portfolio constraint;
Other versions of this item:
- Huang, K.X., 1999. "Valuation and Asset Pricing in Infinite Horizon Sequential Markets with Portfolio Constraints," Papers 302, Minnesota - Center for Economic Research.
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-08-12 (All new papers)
- NEP-FIN-2006-08-12 (Finance)
- NEP-FMK-2006-08-12 (Financial Markets)
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- Kevin Huang, .
"On infinite-horizon minimum-cost hedging under cone constraints,"
2000-22, Utah State University, Department of Economics.
- Huang, Kevin X. D., 2002. "On infinite-horizon minimum-cost hedging under cone constraints," Journal of Economic Dynamics and Control, Elsevier, vol. 27(2), pages 283-301, December.
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