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Valuation and asset pricing in infinite-horizon sequential markets with portfolio constraints

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  • Kevin Huang

Abstract

We 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 [9] to stochastic settings with complete or incomplete markets.

Suggested Citation

  • Kevin Huang, "undated". "Valuation and asset pricing in infinite-horizon sequential markets with portfolio constraints," Working Papers 2000-09, Utah State University, Department of Economics.
  • Handle: RePEc:usu:wpaper:2000-09
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    File URL: ftp://repec.bus.usu.edu/RePEc/usu/pdf/ERI2000-09.pdf
    File Function: First version, 2000
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    Cited by:

    1. 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.

    More about this item

    Keywords

    Valuation; asset price bubble; portfolio constraint;

    JEL classification:

    • 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

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