On Uniqueness of Equilibria in the CAPM - (This paper replaces "Existence and Uniqueness of Equilibria in the CAPM")

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On Uniqueness of Equilibria in the CAPM - (This paper replaces "Existence and Uniqueness of Equilibria in the CAPM")

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Thorsten Hens
Joerg Laitenberger
Andreas Loeffler

Abstract

In the standard CAPM with a riskless asset we give a sufficient condition for uniqueness. This condition is a joint restriction on the agents' endowments and their preferences which is compatible with non-increasing absolute risk aversion and which is in particular satisfied with constant absolute risk aversion. Moreover in the CAPM without a riskless asset we give an example for multiple equilibria even though all agents have constant absolute risk aversion.

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Paper provided by Institute for Empirical Research in Economics - IEW in its series IEW - Working Papers with number iewwp039.

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Handle: RePEc:zur:iewwpx:039

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Find related papers by JEL classification:
G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
C62 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Existence and Stability Conditions of Equilibrium

This paper has been announced in the following NEP Reports:

NEP-ALL-2000-05-08 (All new papers)
NEP-FIN-2000-05-08 (Finance)
NEP-FMK-2000-05-08 (Financial Markets)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Levy, Haim, 1994. "Absolute and Relative Risk Aversion: An Experimental Study," Journal of Risk and Uncertainty, Springer, vol. 8(3), pages 289-307, May.
Merton, Robert C, 1973. "An Intertemporal Capital Asset Pricing Model," Econometrica, Econometric Society, vol. 41(5), pages 867-87, September. [Downloadable!] (restricted)
Nielsen, Lars Tyge, 1990. "Existence of equilibrium in CAPM," Journal of Economic Theory, Elsevier, vol. 52(1), pages 223-231, October. [Downloadable!] (restricted)
John Geanakoplos & Martin Shubik, 1989. "The Capital Asset Pricing Model as a General Equilibrium with Incomplete Markets," Cowles Foundation Discussion Papers 913, Cowles Foundation, Yale University. [Downloadable!]
Dalal, Ardeshir J & Arshanapalli, Bala G, 1993. " Estimating the Demand for Risky Assets via the Indirect Expected Utility Function," Journal of Risk and Uncertainty, Springer, vol. 6(3), pages 277-88, June.
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!]

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