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Theoretical Framework for Stock Pricing Process based on Micro-Economic Decision Model

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  • Vitaly Kaganov

    (PhD student, Poznań University of Economics and Business)

Abstract

The most common model for asset pricing (CAPM) is problematic and does not match the reality. In this article, I introduce a theoretical framework for a new model which aims at avoiding the problems of CAPM and keeping its advantages, therefore allowing universality of asset pricing. The model is built on the economic principles, using a budget constraint and a Risk Appetite (RA) function. It is based on the micro-economic decision model, involving an expected value and dividing a stock price to objective and subjective prices. As a result, rational based individuals, just like individuals with non-rational factors, may use the model to calculate a future price stock in exactly the same way.

Suggested Citation

  • Vitaly Kaganov, 2017. "Theoretical Framework for Stock Pricing Process based on Micro-Economic Decision Model," Research Papers in Economics and Finance, Poznań University of Economics and Business, vol. 2(2), pages 29-37, March.
    • Handle: RePEc:jbl:ref000:v:2:y:2017:i:2:id:40
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    References listed on IDEAS

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