Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/67855
Authors: 
Elliott, Robert
Madan, Dilip
Milne, Frank
Year of Publication: 
2002
Series/Report no.: 
Queen's Economics Department Working Paper 1081
Abstract: 
Investors in equilibrium are modeled as facing investor specific risks across the space of assets. Personalized asset pricing models reflect these risks. Averaging across the pool of investors we obtain a market asset pricing model that reflects market risk exposures. It is observed on invoking a law of large numbers applied to an infinite population of investors, that many personally relevant risk considerations can be eliminated from the market asset pricing model. Examples illustrating the effects of undiversified labor income and taste specific price indices are provided. Suggestions for future work on asset pricing include a need to focus on identifying and explaining investor specific risk exposures.
Subjects: 
Diversification
Asset Pricing
Investor specific risks
JEL: 
G12
G13
Document Type: 
Working Paper

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