Excerpt from On Euler-Equation Restrictions on the Temporal Behavior of Asset Returns Much of the current thinking in finance concerning the pricing of risky assets has its origin in Markowitz's [1952] analysis of the techniques for constructing mean - variance efficient portfolios of those assets. Sharpe Lintner and Mossin [1966] all realized that a market-clearing equilibrium in which investors hold mean-variance efficient portfolios, as they will do if asset returns are normally distributed and/or if their utility ...
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Excerpt from On Euler-Equation Restrictions on the Temporal Behavior of Asset Returns Much of the current thinking in finance concerning the pricing of risky assets has its origin in Markowitz's [1952] analysis of the techniques for constructing mean - variance efficient portfolios of those assets. Sharpe Lintner and Mossin [1966] all realized that a market-clearing equilibrium in which investors hold mean-variance efficient portfolios, as they will do if asset returns are normally distributed and/or if their utility functions are quadratic (tobin implies a model for pricing the risk of any individual asset. Merton [1971] showed that as long as investors can trade frequently, and in the limit continuously, the sharpe-lintner-mossin model holds for 331 concave utility function if asset returns are lognormally distributed. If the distribution of asset returns is not lognormal, but shifts around over time, Merton [1973] extended his analysis to show that the risk of any individual asset can still be priced, for any concave utility function, in terms of a set of mutual funds whose composition does not depend on investor preferences. Ross [1976, 1977] proved that if asset returns are assumed to be generated by a linear factor model, then the risk premium for any asset will be related to its factor risk and non-asset-specific factor risk premiums. About the Publisher Forgotten Books publishes hundreds of thousands of rare and classic books. Find more at ... This book is a reproduction of an important historical work. Forgotten Books uses state-of-the-art technology to digitally reconstruct the work, preserving the original format whilst repairing imperfections present in the aged copy. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in our edition. We do, however, repair the vast majority of imperfections successfully; any imperfections that remain are intentionally left to preserve the state of such historical works.
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