Home > Research > Publications & Outputs > Existence of an optimal portfolio for every inv...

Electronic data

View graph of relations

Existence of an optimal portfolio for every investor in an Arrow-Bebreu economy

Research output: Working paper

Published
Publication date2002
Place of PublicationLancaster University
PublisherThe Department of Accounting and Finance
Original languageEnglish

Publication series

NameAccounting and Finance Working Paper Series

Abstract

In this paper we discuss the existence of an optimal portfolio for every investor in a two-period Arrow -Debreu economy in which risky assets are contingent claims on aggregate consumption. Since we derive an optimal portfolio for every investor, the pricing kernel is endogenously determined. Hence the sufficient conditions for the existence of optimal portfolios given in this paper do not involve the pricing kernel; instead they are directly on investors preferences and beliefs. We also present a new approach to the equilibrium, which works with the space of investors first-period consumption. The case where investors have background risk is also discussed.