|
| |
| 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:
C6 - Mathematical Methods and Programming: General |
| |
| Manuscript Received : Jun 21 2015 | | Manuscript Accepted : Aug 21 2015 |
|
