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Zhao Han
 
''A Dynamic Asset Pricing Model with Non-myopic Traders''
( 2015, Vol. 35 No.3 )
 
 
Dynamic asset pricing models built within the classic CARA-Normal framework usually assume myopic traders with one-period investment horizons or infinitely lived investors for tractability. I relax this myopic assumption and show the values of more finite trading opportunities are state-contingent and arise naturally as non-central $chi^2$-distributed. The moment generating function of the non-central $chi^2$ distribution thus can be utilized to derive the traders' first order conditions and preserve closed-form solutions. The model with non-myopic traders has a modified two-period overlapping generations(OLG) interpretation in which each young generation can have multiple investment opportunities.
 
 
Keywords: Investment Horizons, Non-central $chi^2$ Distribution, Overlapping Generations Model
JEL: G1 - (G11, G13, G13) Portfolios, Investments, Asset and Futures Pricing, Trading Volume & Bond Interest Rates
C6 - Mathematical Methods and Programming: General
 
Manuscript Received : Jun 21 2015 Manuscript Accepted : Aug 21 2015

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