Theoretical Framework for Stock Pricing Process based on Micro-Economic Decision Model

Vitaly Kaganov
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Vitaly Kaganov: PhD student, Poznań University of Economics and Business

Research Papers in Economics and Finance, 2017, vol. 2, issue 2, 29-37

Abstract: The most common model for asset pricing (CAPM) is problematic and does not match the reality. In this article, I introduce a theoretical framework for a new model which aims at avoiding the problems of CAPM and keeping its advantages, therefore allowing universality of asset pricing. The model is built on the economic principles, using a budget constraint and a Risk Appetite (RA) function. It is based on the micro-economic decision model, involving an expected value and dividing a stock price to objective and subjective prices. As a result, rational based individuals, just like individuals with non-rational factors, may use the model to calculate a future price stock in exactly the same way.

Keywords: Asset Pricing; CAPM; Risk Appetite; Economic Approach (search for similar items in EconPapers)
Date: 2017
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