Book ChapterDOI
Chapter 15 The specification and influence of asset markets
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In this article, the authors discuss portfolio balance models with postulated asset demands, asset demands broadly consistent with but not directly implied by microeconomic theory, and discuss that the consumer arrives at his or her asset demands by maximizing his or their utility given interest rates and the parameters of the distributions of prices and exchange rates.Abstract:
Publisher Summary This chapter discusses portfolio balance models with postulated asset demands, asset demands broadly consistent with but not directly implied by microeconomic theory. The demand for the sum of assets denominated in each currency is homogeneous of degree one in nominal wealth, and the demand for money in each country depends on the return on the security denominated in that country's currency but not on the return on securities denominated in other currencies. However, under these same assumptions the demand for money depends on real wealth. Because the conclusions of macroeconomic analysis often depend crucially on the form of asset demand functions, it is important to continue to explore the implications of the microeconomic theory and other microeconomic approaches. The chapter discusses that the consumer arrives at his or her asset demands by maximizing his or her utility given interest rates and the parameters of the distributions of prices and exchange rates. The distributions of prices and exchange rates are not invariant to changes in the distributions of policy variables and stochastic components of tastes and technology. It has been recognized that a very important item on the research agenda is imbedding consumer's asset demands based on utility maximization in a general equilibrium model in which the distributions of prices and exchange rates are determined endogenously.read more
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Monetary Economics: An Integrated Approach to Credit, Money, Income, Production and Wealth
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Exchange Rate, Equity Prices and Capital Flows
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References
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Journal ArticleDOI
A Theory of the Term Structure of Interest Rates.
TL;DR: In this paper, the authors use an intertemporal general equilibrium asset pricing model to study the term structure of interest rates and find that anticipations, risk aversion, investment alternatives, and preferences about the timing of consumption all play a role in determining bond prices.
Journal ArticleDOI
Portfolio Selection: Efficient Diversification of Investments
Alan Stuart,Harry M. Markowitz +1 more
TL;DR: In this article, the authors defined asset classes technology sector stocks will diminish as the construction of the portfolio, and the construction diversification among the, same level of assets, which is right for instance among the assets.
Journal ArticleDOI
Econometric policy evaluation: A critique
Journal ArticleDOI
Optimum consumption and portfolio rules in a continuous-time model☆
TL;DR: In this paper, the authors considered the continuous-time consumption-portfolio problem for an individual whose income is generated by capital gains on investments in assets with prices assumed to satisfy the geometric Brownian motion hypothesis, which implies that asset prices are stationary and lognormally distributed.
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