Skip Navigation

This Article
Right arrow Full Text (PDF)
Right arrow Alert me when this article is cited
Right arrow Alert me if a correction is posted
Services
Right arrow Email this article to a friend
Right arrow Similar articles in this journal
Right arrow Similar articles in ISI Web of Science
Right arrow Alert me to new issues of the journal
Right arrow Add to My Personal Archive
Right arrow Download to citation manager
Right arrow Search for citing articles in:
ISI Web of Science (37)
Right arrowRequest Permissions
Google Scholar
Right arrow Articles by Duffie, D.
Right arrow Articles by Epstein, L. G.
Right arrow Search for Related Content
Social Bookmarking
Add to CiteULike   Add to Connotea   Add to Del.icio.us  
What's this?

Rev Fin 1992; 5:411-436
© 1992 the Society for Financial Studies

Article

Asset pricing with stochastic differential utility

D Duffie1,z and LG Epstein2
1 Graduate School of Business, Stanford University, Stanford, CA 94305-5015, USA
2 University of Toronto, Canada
z Corresponding author

Abstract

Asset pricing theory is presented with representative-agent utility given by a stochastic differential formulation of recursive utility. Asset returns are characterized from general first-order conditions of the Hamilton-Bellman-Jacobi equation for optimal control. Homothetic representative agent recursive utility functions are shown to imply that excess expected rates of return on securities are given by a linear combination of the continuous-time market-portfolio-based capital asset pricing model (CAPM) and the consumption-based CAPM. The Cox, Ingersoll and Ross characterization of the term structure is examined with a recursive generalization, showing the response of the term structure to variations in risk aversion. Also, a new multicommodity factor-return model, as well as an extension of the 'usual' discounted expected value formula for asset prices, is introduced.


Add to CiteULike CiteULike   Add to Connotea Connotea   Add to Del.icio.us Del.icio.us    What's this?


This article has been cited by other articles:


Home page
 REV FINANC STUDHome page
J. Liu, J. Pan, and T. Wang
An Equilibrium Model of Rare-Event Premia and Its Implication for Option Smirks
Rev. Financ. Stud., January 1, 2005; 18(1): 131 - 164.
[Abstract] [Full Text] [PDF]

Home page
 REV FINANC STUDHome page
P. J. Maenhout
Robust Portfolio Rules and Asset Pricing
Rev. Financ. Stud., October 1, 2004; 17(4): 951 - 983.
[Abstract] [Full Text] [PDF]


Disclaimer:
Please note that abstracts for content published before 1996 were created through digital scanning and may therefore not exactly replicate the text of the original print issues. All efforts have been made to ensure accuracy, but the Publisher will not be held responsible for any remaining inaccuracies. If you require any further clarification, please contact our Customer Services Department.