Stability of equilibrium asset pricing models: A necessary and sufficient condition

Jaroslav Borovička and John Stachurski

Journal of Economic Theory, 2021, vol. 193, issue C

Abstract: We obtain an exact necessary and sufficient condition for the existence and uniqueness of equilibrium asset prices in infinite horizon, discrete-time, arbitrage free environments. Using local spectral radius methods, we connect the condition, and hence the problem of existence and uniqueness of asset prices, with the recent literature on stochastic discount factor decompositions. Our results include a globally convergent method for computing prices whenever they exist. Convergence of this iterative method itself implies both existence and uniqueness of equilibrium asset prices.

Keywords: Asset pricing; Equilibrium prices; Spectral methods (search for similar items in EconPapers)
JEL-codes: D81 G11 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Stability of Equilibrium Asset Pricing Models: A Necessary and Sufficient Condition (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:193:y:2021:i:c:s0022053121000442

DOI: 10.1016/j.jet.2021.105227

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