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Uniqueness of Equilibrium in the Classical Capital Asset Pricing Model

Published online by Cambridge University Press:  06 April 2009

Lars Tyge Nielsen
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Abstract

General equilibrium in the classical two-period mean-variance capital asset pricing model is not unique. Corresponding to one single set of expectations, utility functions, and an initial wealth distribution, there may be several equilibria, and an asset may have different prices, expected rates of return, and betas in different equilibria. However, any equilibrium portfolio is sustained by a unique price system, and if investors have decreasing risk aversion, then any equilibrium allocation of the risky assets is sustained by a unique price system.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 23 , Issue 3 , September 1988 , pp. 329 - 336
Copyright
Copyright © School of Business Administration, University of Washington 1988

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References

eferences

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