In this paper, the volatility of the return generating process of the market portfolio and the slope coefficient of the market model is assumed to follow a Markov switching process of order one. The results indicate very strong evidence of volatility switching behaviour in a sample of returns in...

This paper examines a decision-making problem of rational agents with risk averse utilities in the financial market both in statics and in dynamics. In the financial market there are two securities, one risky security and one riskless bond, and a continuum of investors with heterogeneous...

This paper analyses a temporary financial market equilibrium by considering a two-period model of asset pricing with s securities, one riskless bond, and a continuum of heterogeneous agents with different preferences, endowments, and beliefs. Investors' objectives are to maximize the expected...

Manski [2004] analyzes the relationship between the distribution of traders’ beliefs and the equilibrium price in a prediction market with risk neutral traders. He finds that there can be a substantial difference between the mean belief that an event will occur, and the price of an asset that...

Asset prices are forward looking. This evidence implies that prices of financial assets are essentially determined by the traders expectations about future prices. Another evidence about asset prices is that these do not seem to follow a predictable pattern over time; we observe periods of high...

This paper provides a review of the main features of asset pricing models. The review includes single-factor and multifactor models, extended forms of the Capital Asset Pricing Model with higher order co- moments, and asset pricing models conditional on time-varying volatility.

Introducing one additional element due to possible misfortune to the return of each of two assets in the basic model of Samuelson (Rev.Econom.Statist.51 (1969)239)on optimum portfolio and consumption decisions,this paper resolves both the excess equity premium and the excess consumption...