Hostname: page-component-78c5997874-4rdpn Total loading time: 0 Render date: 2024-11-15T18:54:09.703Z Has data issue: false hasContentIssue false
  • English
  • Français

A Note on Capital Asset Pricing Model under Uncertain Inflation

Published online by Cambridge University Press:  06 April 2009

C. S. Pyun
Get access Rights & Permissions [Opens in a new window]

Extract

The well known Sharpe-Lintner-Mossin capital asset pricing model (CAPM) assumes the existence of stability in the price level so that the market price of risk (MPR) measured in nominal terms is the same for all risky assets in an equilibrium market. Friend, Landskroner and Losq [5, hereafter F-L-L] have recently shown that CAPM measured in nominal terms understates the MPR if an uncertain inflation is expected and if a covariance between the rate of return on the market and the rate of inflation is positive (p. 1287).

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 15 , Issue 2 , June 1980 , pp. 425 - 434
Copyright
Copyright © School of Business Administration, University of Washington 1980

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

[1]Chen, A. H. and Boness, A. J.. “Effects of Uncertain Inflation on the Investment and Financing Decisions of a Firm.” Journal of Finance, Vol. 30 (05 1975), pp. 469–483.CrossRefGoogle Scholar
[2]Budd, A. P. and Litzenberger, R. H.. “The Market Price of Risk, Size of the Market and Investors' Risk Aversion: A Comment.” Review of Economics and Statistics (05 1972), pp. 204–206.CrossRefGoogle Scholar
[3]Fischer, S. “The Demand for Index Bonds.” Journal of Political Economy, Vol. 83 (06 1975), pp. 509–534.CrossRefGoogle Scholar
[4]Friend, I. and Blume, M. E. “The Demand for Risky Assets.” American Economic Review (12 1975), pp. 900–922.Google Scholar
[5]Friend, I.; Landskroner, Y.; and Losq, E.. “The Demand for Risky Assets under Uncertain Inflation.” Journal of Finance, Vol. 31 (12 1976), pp. 1287–1297.Google Scholar
[6]Gordon, M. J. and Halpern, P. J.. “Bond Share Yield Spreads under Uncertain Inflation.” American Economic Review, Vol. 66 (09 1976), pp. 559–565.Google Scholar
[7]Jensen, M. C.. “Capital Markets: Theory and Evidence.” Bell Journal of Economics and Management Science, Vol. 3 (Autumn 1972), pp. 357–398.Google Scholar
[8]Lintner, J. “The Market Price of Risk, Size of Market and Investors' Risk Aversion.” Review of Economics and Statistics (02 1970), pp. 87–99.CrossRefGoogle Scholar
[9]Mossin, J. “Security Pricing and Investment Criteria in Competitive Markets.” American Economic Review (12 1969), pp. 749–756.Google Scholar