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Economics

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Further tests of the separation theorem and the capital asset pricing model

Article Abstract:

The separation theorem and the capital asset pricing model were contradicted by a 1988 study of portfolio-selection theory. The errors in the study were corrected in a second study, which provided more support for portfolio theory. The subjects in the first study had little experience in finance or economics, and they faced little potential loss. The participants in the second experiment were more business oriented, and their decisions were made available to the other participants to simulate market behavior. The possibility of loss was also introduced.

Research, Capital assets pricing model, Capital asset pricing model

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Noncooperative bargaining, hostages and optimal asset ownership

Article Abstract:

An investigation into the potential of an asset loss to increase the investment incentive for the investor losing the asset in a joint relationship underscores the importance of the 'hostage' or the threat point in noncooperative bargaining. This is due to the limited options available for the asset loser which increases the investment incentive due to the diminishing asset ownership condition of the agent.

Personal Investing, Personal finance, Investments, Negotiation, Negotiations

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A comment on Rothschild and Stiglitz's "Increasing Risk: I. A. Definition"

Article Abstract:

The validity of the Lemma 1 of Rothschild and Stiglitz' theory of risk model was further reinforced with the reformulation of the proof for the Lemma. The reformulation was done with the mean preserving spread parameter to ensure that the characteristic of the cdf of F(sub)i is preserved. No other modifications are necessary with the other theorems to assert the validity of the model.

Asset & Risk Management, Risk assessment, Risk (Economics)

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