Econometrica

Journal Of The Econometric Society

An International Society for the Advancement of Economic
Theory in its Relation to Statistics and Mathematics

Edited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262

Econometrica: Jul, 1988, Volume 56, Issue 4

Arbitrage and Diversification in a General Equilibrium Asset Economy

https://www.jstor.org/stable/1912700
p. 815-840

Frank Milne

This paper presents a theory of equilibrium asset pricing that generalizes the recent work of Connor. The model extends Connor's results to more general sets of asset returns and consumer preferences, introduces production, and provides a framework for analyzing exact and approximate equilibrium asset pricing. The other major contribution of the paper is the introduction of geometric arguments that exploit the properties of induced preferences over assets. This method of analyzing asset pricing provides an intuitively appealing way of analyzing equilibrium asset pricing theories.


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