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Capital Market Equilibrium with Divergent Investment Horizon Length Assumptions

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  • Gilster, John E.

Abstract

The Sharpe-Lintner Capital Asset Pricing Model (CAPM) has always contained an implicit question: what if all investors are single-period wealth maximizers but the length of the single period varies across investors? Gressis, Philappatos, and Hayya (GPH) [7] have pointed out that as the assumption of investment horizon length is changed, the Capital Market Line (CML) intersects the Efficient Frontier (EF) at different points causing different investors to hold different efficient portfolios. GPH assert that these different portfolio holdings will result in an inefficient market portfolio—and dire consequences for the capital market model.

Suggested Citation

  • Gilster, John E., 1983. "Capital Market Equilibrium with Divergent Investment Horizon Length Assumptions," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 18(2), pages 257-268, June.
    • Handle: RePEc:cup:jfinqa:v:18:y:1983:i:02:p:257-268_01
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    Cited by:

    1. Kathleen Walsh, 2015. "The investment horizon and asset pricing models," Australian Journal of Management, Australian School of Business, vol. 40(2), pages 277-294, May.

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