### Abstract

Original language | English |
---|---|

Place of Publication | Tilburg |

Publisher | Microeconomics |

Number of pages | 41 |

Volume | 1999-54 |

Publication status | Published - 1999 |

### Publication series

Name | CentER Discussion Paper |
---|---|

Volume | 1999-54 |

### Fingerprint

### Keywords

- asset pricing
- general equilibrium
- incomplete markets
- computational methods

### Cite this

*The Robustness of the CAPM - A Computational Approach*. (CentER Discussion Paper; Vol. 1999-54). Tilburg: Microeconomics.

}

**The Robustness of the CAPM - A Computational Approach.** / Herings, P.J.J.; Kubler, F.

Research output: Working paper › Discussion paper › Other research output

TY - UNPB

T1 - The Robustness of the CAPM - A Computational Approach

AU - Herings, P.J.J.

AU - Kubler, F.

N1 - Pagination: 41

PY - 1999

Y1 - 1999

N2 - In this paper we argue that in realistically calibrated two period general equilibrium models with incomplete markets CAPM-pricing provides a good benchmark for equilibrium prices even when agents are not mean-variance optimizers and returns are not normally distributed. We numerically approximate equilibria for a variety of different specifications for preferences, endowments and dividends and compare the equilibrium prices and portfolio-holdings to the predictions of the CAPM. While the CAPM does not hold exactly for the chosen specification, it turns out that pricing errors are extremely small. Furthermore, two-fund separation holds approximately.

AB - In this paper we argue that in realistically calibrated two period general equilibrium models with incomplete markets CAPM-pricing provides a good benchmark for equilibrium prices even when agents are not mean-variance optimizers and returns are not normally distributed. We numerically approximate equilibria for a variety of different specifications for preferences, endowments and dividends and compare the equilibrium prices and portfolio-holdings to the predictions of the CAPM. While the CAPM does not hold exactly for the chosen specification, it turns out that pricing errors are extremely small. Furthermore, two-fund separation holds approximately.

KW - asset pricing

KW - general equilibrium

KW - incomplete markets

KW - computational methods

M3 - Discussion paper

VL - 1999-54

T3 - CentER Discussion Paper

BT - The Robustness of the CAPM - A Computational Approach

PB - Microeconomics

CY - Tilburg

ER -