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The CAPM Risk Adjustment Needed for Exact Aggregation over Financial Assets

Listed author(s):
  • William Barnett

    (Department of Economics, The University of Kansas)

  • Yi Liu

    (Washington University in St.Louis)

  • Haiyang Xu

    (Washington University in St.Louis)

  • Mark Jensen

    (Southern Illinois University at Carbondale)

This cumulative working paper contains the unified joint research completed so far on monetary aggregation under risk, including the extension of index number theory needed to incorporate adjustments for risk into the rate structure, experiments on tracking ability of the unadjusted index, and results on velocity instability when the risk adjustment is ignored and velocity instability is induced by overlooked stochastic volatility of interest rates. The paper was presented at the September 1995 Conference on Computation and Estimation in Finance and Economics, held at Washington University and organized by William Barnett, Lars Hansen, and George Tauchen. The conference proceedings will be published by Cambridge University Press.

(This abstract was borrowed from another version of this item.)

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File URL: http://www2.ku.edu/~kuwpaper/2009Papers/201215.pdf
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Paper provided by University of Kansas, Department of Economics in its series WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS with number 201215.

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Length: 48 pages
Date of creation: Sep 2012
Date of revision: Sep 2012
Handle: RePEc:kan:wpaper:201215
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