Theory of Valuation, Second Edition
An intertemporal asset pricing model with stochastic consumption and investment opportunities
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, Chapter
Breeden, DT
January 1, 2005
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 singlegood 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.
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Breeden, D. T. (2005). An intertemporal asset pricing model with stochastic consumption and investment opportunities. In Theory of Valuation, Second Edition (pp. 53–84). https://doi.org/10.1142/9789812701022_0003
Breeden, D. T. “An intertemporal asset pricing model with stochastic consumption and investment opportunities.” In Theory of Valuation, Second Edition, 53–84, 2005. https://doi.org/10.1142/9789812701022_0003.
Breeden DT. An intertemporal asset pricing model with stochastic consumption and investment opportunities. In: Theory of Valuation, Second Edition. 2005. p. 53–84.
Breeden, D. T. “An intertemporal asset pricing model with stochastic consumption and investment opportunities.” Theory of Valuation, Second Edition, 2005, pp. 53–84. Scopus, doi:10.1142/9789812701022_0003.
Breeden DT. An intertemporal asset pricing model with stochastic consumption and investment opportunities. Theory of Valuation, Second Edition. 2005. p. 53–84.