Asset Markets and Investment Decisions

Anja De Waegenaere (), Heracles M. Polemarchakis and Luigi Ventura
Additional contact information
Heracles M. Polemarchakis: CORE, Universite Catholique de Louvain

No 1147, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: In an incomplete asset market, firms assign values to investment plans by projecting their payoffs on the span of the payoffs of marketed assets; equivalently, firms employ the Capital Asset Pricing Model. This is a criterion that does not require firms to possess information, such as the marginal valuation of revenue across date -- events by shareholders, which is not observable; rather, it is based on information revealed by the prices and payoffs of marketed assets. Under standard assumptions, competitive equilibria exist. But, competitive equilibrium allocations need not satisfy a condition of constrained Pareto optimality that recognizes the incompleteness of the asset market; and, even in the absence of nominal assets, competitive equilibrium allocations are generically indeterminate -- they are determinate if firm consider the commodity payoffs of shares.

Keywords: Assets; profit; investment (search for similar items in EconPapers)
JEL-codes: D46 D50 D52 (search for similar items in EconPapers)
Pages: 25 pages
Date: 1997-02
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in International Economic Review (2002), 43: 857-873

Downloads: (external link)
https://cowles.yale.edu/sites/default/files/files/pub/d11/d1147.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
Journal Article: Asset Markets and Investment Decisions (2002)
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:cwl:cwldpp:1147

Ordering information: This working paper can be ordered from
Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA
The price is None.

Access Statistics for this paper

More papers in Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University Yale University, Box 208281, New Haven, CT 06520-8281 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Brittany Ladd ().