A Note on the CAPM With Endogenously Consistent Market Returns

@article{Krause2021ANO,
  title={A Note on the CAPM With Endogenously Consistent Market Returns},
  author={Andreas Krause},
  journal={Capital Markets: Asset Pricing \& Valuation eJournal},
  year={2021}
}
  • Andreas Krause
  • Published 2021
  • Economics
  • Capital Markets: Asset Pricing & Valuation eJournal
I demonstrate that with the market return determined by the equilibrium returns of the CAPM, expected returns of an asset are affected by the risks of all assets jointly. Another implication is that the range of feasible market returns will be limited and dependent on the distribution of weights in the market portfolio. A large and well diversified market with no dominating asset will only return zero while a market dominated by a small number of assets will only return the risk-free rate. In… Expand

References

SHOWING 1-6 OF 6 REFERENCES
EQUILIBRIUM IN A CAPITAL ASSET MARKET
This paper investigates the properties of a market for risky assets on the basis of a simple model of general equilibrium of exchange, where individual investors seek to maximize preference functionsExpand
THE VALUATION OF RISK ASSETS AND THE SELECTION OF RISKY INVESTMENTS IN STOCK PORTFOLIOS AND CAPITAL BUDGETS
Publisher Summary This chapter discusses the problem of selecting optimal security portfolios by risk-averse investors who have the alternative of investing in risk-free securities with a positiveExpand
CAPITAL ASSET PRICES: A THEORY OF MARKET EQUILIBRIUM UNDER CONDITIONS OF RISK*
One of the problems which has plagued thouse attempting to predict the behavior of capital marcets is the absence of a body of positive of microeconomic theory dealing with conditions of risk/Expand
Equilibrium in a capital asset
  • market. Econometrica,
  • 1966
Portfolio selection
  • The Journal of Finance,
  • 1952