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Equilibrium in a Capital Asset Market

1966; Wiley; Volume: 34; Issue: 4 Linguagem: Inglês

10.2307/1910098

1468-0262

Jan Mossin,

Stochastic processes and financial applications

This paper investigates the properties of a for risky assets on the basis of a simple model of general equilibrium of exchange, where individual investors seek to maximize preference functions over expected yield and variance of yield on their port- folios. A theory of risk premiums is outlined, and it is shown that general equilibrium implies the existence of a so-called market line, relating per dollar expected yield and standard deviation of yield. The concept of price of risk is discussed in terms of the slope of this line.