EXISTENCE, UNIQUENESS, AND DETERMINACY OF A NONNEGATIVE EQUILIBRIUM PRICE VECTOR IN ASSET MARKETS WITH GENERAL UTILITY FUNCTIONS AND AN ELLIPTICAL DISTRIBUTION

Zhiping Chen ()
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Zhiping Chen: Department of Scientific Computing and Applied Software, Faculty of Science, Xi'an Jiaotong University, 710049, Xi'an, Shaanxi, P. R. China

Asia-Pacific Journal of Operational Research (APJOR), 2004, vol. 21, issue 03, 393-405

Abstract: For the asset market with finite numbers of investors whose utility functions are general concave functions, we derive a necessary and sufficient condition for the existence and uniqueness of the nonnegative equilibrium price vector that clears the asset market, through considering the expected utility maximization problem under the assumption that the joint distribution of risky assets' returns is an elliptical distribution. An explicit formula for the equilibrium price is given. We also discuss the economic implication of the given condition and demonstrate that our necessary and sufficient condition can be regarded as a necessary condition to maintain the stability of the asset market. These results extend some results about the equilibrium analysis of the asset market.

Keywords: Equilibrium prices; the asset market; utility functions; the elliptical distribution; optimal portfolios; economic implication (search for similar items in EconPapers)
Date: 2004
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DOI: 10.1142/S0217595904000308

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