On the recoverability of preferences and beliefs in financial models
Domenico Cuoco, Fernando Zapatero, Instituto Tecnológico Autónomo de México. Centro de Investigación Económica
ITAM, Centro de Investigación Económica, 1996 - Business & Economics - 16 pages
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aggregate consumption process arbitrary assume beliefs and preferences beliefs are represented Brownian motion Capital Accumulation CCAPM class of utility coefficient of relative denotes the inverse density process dividends dwp(T Econometrica Economic Theory economy equilibrium prices equity premium examine the extent functions and beliefs Girsanov's theorem given price HUYBENS hyperbolic tangent implies interest rate process intertemporal consumption investment strategy investor draws utility investor's preferences investor's problem Ito's lemma Journal of Economic Karatzas Kiyotaki-Wright Model Leland marginal utility Market Frictions Markovian martingale condition mp(y observationally equivalent ORTIGUEIRA P-martingale partial differential equation possibility of recovering preferences and beliefs preferences for terminal price and consumption price dynamics price process relative risk aversion RENERO risk aversion coefficient risk premium SANTOS satisfied set of preferences set of solutions shows Shreve single representative agent Stochastic Stochastic Processes strictly positive subjective beliefs terminal wealth time-homogeneous utility from intertemporal utility from terminal utility function Wang