Adjustment costs and capital asset pricing

Article Abstract:

Asset pricing is related to two factors in these discrete-time models:(1) the economy's level of technological advancement, and (2) the factors affecting the price of capital. The research assigns adjustment costs to varying levels of technology and relates these investment adjustment costs to capital asset prices. Several asset pricing models are thus developed, and data from the models are presented for different technological economies. The discussion following the research presented focuses on: the failure of previously developed asset pricing models to represent certain time-series factors in asset returns and the 'overlapping generations' time framework within which this research is conducted.

United States, Capital

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The geometry of the maximum likelihood estimator of the zero-beta return

Article Abstract:

One of the factors affecting returns on assets identified by the capital assets pricing model, the zero-beta return, is analyzed according to geometric relations in mean-variance space. The geometric analysis considers a portfolio sectioned according to parabolas determined by zero-beta returns and maximum likelihood estimators to indicate that the parabolas' zeros are the portfolio's maximum likelihood estimators. Following the geometric analysis, a discussion of the Likelihood Ratio Test for capital assets suggests that an additional interpretation of portfolio efficiency may be accomplished in portfolios without a riskless asset.

Capital market, Capital markets

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Information, asset prices, and the volume of trade

Article Abstract:

A dynamic equilibrium model is constructed in which agents with access to different information sets participate in the capital market. Agents must use the equilibrium price of capital to make optimal forecasts of the return to holding capital. Examples show that the volume of trade, as well as the price of capital, can be highly correlated with a measure of the information content of prices. This measure of information is the difference between the unconditional entropy of the dividend and the entropy of the dividend conditional on observing the price of capital. (Reprinted by permission of the publisher.)

Analysis, Prices, Capital assets, Equilibrium (Economics)

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