Hostname: page-component-78c5997874-mlc7c Total loading time: 0 Render date: 2024-11-15T05:34:44.435Z Has data issue: false hasContentIssue false
  • English
  • Français

Necessary Conditions for Aggregation in Securities Markets

Published online by Cambridge University Press:  06 April 2009

M. J. Brennan  and
Alan Kraus
Get access Rights & Permissions [Opens in a new window]

Extract

An important aggregation problem is the derivation of equilibrium security prices which are independent of the allocation of initial wealth among investors. The problem is of interest because, if investors are conceived as being endowed with initial holdings of securities, it is clear that the initial wealth allocation which depends on security prices is endogenous to the model. Although he addresses a differently defined objective, Rubinstein [8] has shown that sufficient conditions for the solution of the problem described above are conditions that permit construction of “composite” (representative) investors whose resources, beliefs, and tastes depend on the exogenous specifications of the economy (viz., the beliefs and tastes of all investors and production conditions) but not on the initial allocation of securities.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 13 , Issue 3 , September 1978 , pp. 407 - 418
Copyright
Copyright © School of Business Administration, University of Washington 1978

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]Cass, D., and Stiglitz, J.. “The Structure of Investor Preferences and Asset Returns, and Separability in Portfolio Allocation: A Contribution to the Pure Theory of Mutual Funds.” Journal of Economic Theory, Vol. 2 (1970), pp. 122–160.CrossRefGoogle Scholar
[2]Gorman, W. “Community Preference Fields.” Econometrica, Vol. 21 (1953), pp. 63–80.CrossRefGoogle Scholar
[3]Hakansson, N. “The Superfund: Efficient Paths toward a Complete Financial Market.” Working Paper No. 25, Institute of Business and Economic Research, University of California, Berkeley (1974).Google Scholar
[4]Lintner, J. “The Market Price of Risk, Size of Market and Investor's Risk Aversion.” Review of Economic Statistics, Vol. 52 (1970), pp. 87–99.CrossRefGoogle Scholar
[5]Litzenberger, R., and Budd, A.. “Secular Trends in Risk Premiums.” Journal of Finance, Vol. 27 (1972), pp. 857–864.CrossRefGoogle Scholar
[6]Milne, F. “Consumer Preferences, Linear Demand Functions and Aggregation in Competitive Asset Markets.” Unpublished manuscript, University of Rochester (1976).Google Scholar
[7]Pollack, R. “Additive Utility Functions and Linear Engel Curves.” Review of Economic Studies, Vol. 38 (1971), pp. 401–414.CrossRefGoogle Scholar
[8]Rubinstein, M. “An Aggregation Theorem for Securities Markets.” Journal of Financial Economics, Vol. 1 (1974), pp. 225–244.CrossRefGoogle Scholar
[9]Rubinstein, M. “The Strong Case for the Generalized Logarithmic Utility Model as the Premier Model of Financial Markets.” Journal of Finance, Vol. 31 (1976), pp. 551–571.CrossRefGoogle Scholar
[10]Samuelson, P. “Social Indifference Curves.” Quarterly Journal of Economics, Vol. 70 (1956), pp. 1–22.CrossRefGoogle Scholar
[11]Wilson, R. “The Theory of Syndicates.” Econometrica, Vol. 36 (1968), pp. 119–132.CrossRefGoogle Scholar