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A Note on Capital Asset Pricing Model under Uncertain Inflation

Published online by Cambridge University Press:  06 April 2009

C. S. Pyun
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Extract

The well known Sharpe-Lintner-Mossin capital asset pricing model (CAPM) assumes the existence of stability in the price level so that the market price of risk (MPR) measured in nominal terms is the same for all risky assets in an equilibrium market. Friend, Landskroner and Losq [5, hereafter F-L-L] have recently shown that CAPM measured in nominal terms understates the MPR if an uncertain inflation is expected and if a covariance between the rate of return on the market and the rate of inflation is positive (p. 1287).

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 15 , Issue 2 , June 1980 , pp. 425 - 434
Copyright
Copyright © School of Business Administration, University of Washington 1980

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References

REFERENCES

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