We study the dynamic equilibrium behavior of security prices in an economy where nonfundamental risk arises from agents' heterogeneous beliefs about extraneous processes. We provide a complete characteriszation of equilibrium in terms of the primitives of the economy, via construction of a...

The competitive equilibrium correspondence, which associates equilibrium prices of commodities ans assets with allocations of endowments, identifies the preferences and beliefs of individuals, this is the case even if the asset market is incomplete.