Aggregation, efficiency and mutual fund separation in incomplete markets

Jerome Detemple and Piero Gottardi

Economic Theory, 1998, vol. 11, issue 2, 443-455

Abstract: This paper studies the conditions for aggregation, portfolio separation and effective completeness of competitive allocations in general equilibrium models with incomplete markets where agents have general preference and endowment distributions. We show that these properties are distinct. Demands may aggregate yet may fail to exhibit fund separation and conversely. Fund separation implies effective completeness while aggregation does not. The implications of these properties for the structure of equilibria are discussed, and generalizations of the CAPM, the consumption CAPM and the CAPM with nonmarketed wealth emerge from the analysis.

JEL-codes: D52 G11 G12 (search for similar items in EconPapers)
Date: 1998-01-30
Note: Received: September 12, 1996; revised version: November 7, 1996
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Citations: View citations in EconPapers (10)

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Working Paper: Aggregation, Efficiency and Mutual Fund Separation in Incomplete Markets (1997)
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