Refining the general equilibrium relation that subsists between stock returns, and each of investors’ risk preferences and information sets

Oghenovo A. Obrimah

Finance Research Letters, 2022, vol. 46, issue PB

Abstract: Typically, models of stock prices or returns assume homogeneity of risk preference parameters. This study shows modeling of IPO prices necessarily is with reference to the distribution of risk preference parameters that already are represented in secondary equity markets. Modeling of stock returns is shown predicated only on changes to investors’ information sets, but is required to be robust to each of heterogeneity of risk preference parameters and existence, as an outcome, of representative agents. Non-bindingness of capital constraints facilitates the rational expectation that it is pricing of risk sharing benefits, not raw information, that determines stock prices.

Keywords: IPO quality; Market completeness; Risk sharing; Stock prices; Portfolio diversification; Public equity markets (search for similar items in EconPapers)
JEL-codes: D52 G11 G14 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1544612321004098
Full text for ScienceDirect subscribers only

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: https://EconPapers.repec.org/RePEc:eee:finlet:v:46:y:2022:i:pb:s1544612321004098

DOI: 10.1016/j.frl.2021.102420

Access Statistics for this article

Finance Research Letters is currently edited by R. Gençay

More articles in Finance Research Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().