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Equilibrium in a Capital Asset Market

Jan Mossin
Econometrica
Vol. 34, No. 4 (Oct., 1966), pp. 768-783
Published by: The Econometric Society
DOI: 10.2307/1910098
Stable URL: http://www.jstor.org/stable/1910098
Page Count: 16
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Equilibrium in a Capital Asset Market
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Abstract

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 functions over expected yield and variance of yield on their portfolios. A theory of market risk premiums is outlined, and it is shown that general equilibrium implies the existence of so-called "market line," relating per dollar expected yield and standard deviation of yield. The concept of price of risk is discussed in terms of the slope of this line.

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