Asset Pricing with Incomplete Information In a Discrete Time Pure Exchange Economy

Prasad V. Bidarkota () and Brice Dupoyet ()
Additional contact information
Brice Dupoyet: Department of Finance, Florida International University

No 603, Working Papers from Florida International University, Department of Economics

Abstract: We study the consumption based asset pricing model in a discrete time pure exchange setting with incomplete information. Incomplete information leads to a filtering problem which agents solve using the Kalman filter. We characterize the solution to the asset pricing problem in such a setting. Empirical estimation with US consumption data indicates strong statistical support for the incomplete information model versus the benchmark complete information model. We investigate the ability of the model to replicate some key stylized facts about US equity and riskfree returns.

Keywords: asset pricing; incomplete information; Kalman filter; equity returns; riskfree returns (search for similar items in EconPapers)
JEL-codes: G12 G13 E43 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn, nep-fin, nep-fmk and nep-mac
Date: 2006-05
View list of references

Downloads: (external link)
http://www.fiu.edu/orgs/economics/wp2006/06-03.pdf First version, 2006 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:fiu:wpaper:0603

Access Statistics for this paper

More papers in Working Papers from Florida International University, Department of Economics
Contact information at EDIRC.
Series data maintained by Peter Thompson ().