An intertemporal asset pricing model with stochastic consumption and investment opportunities

Published

Journal Article

This paper derives a single-beta asset pricing model in a multi-good, continuous-time model with uncertain consumption-goods prices and uncertain investment opportunities. When no riskless asset exists, a zero-beta pricing model is derived. Asset betas are measured relative to changes in the aggregate real consumption rate, rather than relative to the market. In a single-good model, an individual's asset portfolio results in an optimal consumption rate that has the maximum possible correlation with changes in aggregate consumption. If the capital markets are unconstrained Pareto-optimal, then changes in all individuals' optimal consumption rates are shown to be perfectly correlated. © 1979.

Full Text

Duke Authors

Cited Authors

  • Breeden, DT

Published Date

  • January 1, 1979

Published In

Volume / Issue

  • 7 / 3

Start / End Page

  • 265 - 296

International Standard Serial Number (ISSN)

  • 0304-405X

Digital Object Identifier (DOI)

  • 10.1016/0304-405X(79)90016-3

Citation Source

  • Scopus