Optimum Demand and Mutual Fund Theorem

Ser-Huang Poon

Chapter 5 in Advanced Finance Theories, 2018, pp 65-82 from World Scientific Publishing Co. Pte. Ltd.

Abstract: This chapter is based on Merton’s (1990) Chapter 5. It is an extension of the previous chapter on “Consumption and Portfolio Selection” to the multi-assets context with a general price process. This chapter is no doubt the most important cornerstone in asset pricing theories. It identifies the optimum portfolios with and without the risk-free interest rate, which is the foundation of the mutual fund and separation theorems, and later become the beta factors models…

Keywords: Intertemporal Portfolio Selection; Capital Structure; General Equilibrium; Spanning; Mutual Fund Theorem; Jumps; Incomplete Markets (search for similar items in EconPapers)
JEL-codes: G30 (search for similar items in EconPapers)
Date: 2018
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