Necessary and sufficient conditions on Gorman aggregation in securities markets with heterogeneous beliefs

Accounting and Finance

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Keywords

Gorman aggregation, demand for securities, contingent-claim pricing, heterogeneous beliefs

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Research output: Working paper

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Necessary and sufficient conditions on Gorman aggregation in securities markets with heterogeneous beliefs. / Huang, James ; Adam-Mueller, Axel.
Lancaster: Lancaster University, 2012.

Research output: Working paper

Bibtex

@techreport{746175a968a143c089049be9c77978a2,

title = "Necessary and sufficient conditions on Gorman aggregation in securities markets with heterogeneous beliefs",

abstract = "Given a group of agents who have divergent beliefs and heterogeneous preferences, we derive a necessary and sufficient condition for the group's aggregate demand for securities to be independent of initial wealth distributions. We also present a necessary and sufficient condition for asset prices to be independent of initial wealth distributions in an economy with heterogeneous beliefs. Contrary to the common belief in the literature, equicautious HARA utility functions are not necessary for Gorman aggregation in securities markets.",

keywords = "Gorman aggregation, demand for securities, contingent-claim pricing, heterogeneous beliefs",

author = "James Huang and Axel Adam-Mueller",

year = "2012",

language = "English",

publisher = "Lancaster University",

type = "WorkingPaper",

institution = "Lancaster University",

}

RIS

TY - UNPB

T1 - Necessary and sufficient conditions on Gorman aggregation in securities markets with heterogeneous beliefs

AU - Huang, James

AU - Adam-Mueller, Axel

PY - 2012

Y1 - 2012

N2 - Given a group of agents who have divergent beliefs and heterogeneous preferences, we derive a necessary and sufficient condition for the group's aggregate demand for securities to be independent of initial wealth distributions. We also present a necessary and sufficient condition for asset prices to be independent of initial wealth distributions in an economy with heterogeneous beliefs. Contrary to the common belief in the literature, equicautious HARA utility functions are not necessary for Gorman aggregation in securities markets.

AB - Given a group of agents who have divergent beliefs and heterogeneous preferences, we derive a necessary and sufficient condition for the group's aggregate demand for securities to be independent of initial wealth distributions. We also present a necessary and sufficient condition for asset prices to be independent of initial wealth distributions in an economy with heterogeneous beliefs. Contrary to the common belief in the literature, equicautious HARA utility functions are not necessary for Gorman aggregation in securities markets.

KW - Gorman aggregation

KW - demand for securities

KW - contingent-claim pricing

KW - heterogeneous beliefs

M3 - Working paper

BT - Necessary and sufficient conditions on Gorman aggregation in securities markets with heterogeneous beliefs

PB - Lancaster University

CY - Lancaster

ER -

Research

Associated organisational units

Keywords