An Equilibrium Capital Asset Pricing Model in Markets with Price Jumps and Price Bubbles
29 Pages Posted: 12 Jun 2017 Last revised: 13 Dec 2017
Date Written: November 30, 2017
Abstract
This paper derives an equilibrium capital asset pricing model (CAPM) in a market where asset prices can exhibit price jumps and price bubbles. We derive a generalized intertertemporal CAPM and consumption CAPM for these markets. The derived risk return relation differs from the classical results only in the characterization of the state price density, which depends on the existence of price bubbles, and in the number and quantity of systematic risk factors.
Keywords: Intertemporal CAPM, Consumption CAPM, Asset Price Bubbles, Diffusion and Jump Processes
JEL Classification: G12, G11, D53, D52
Suggested Citation: Suggested Citation