Asset Prices in an Exchange Economy

Lucas, R. E. J. (1978). Asset Prices in an Exchange Economy. Econometrica, 46(6), 1429-1445.

Type

Journal article

Intellectual base

Primary research

Year

1978

Volume

46

Issue

6

Pages

1429-1445

DOI

10.2307/1913837

DOI registrant

JSTOR

Link

https://doi.org/10.2307/1913837

Cited from

economics_finance

Cited by

2 citations across 2 artifacts.

Each citation links to the sentence it supports in the citing article.

Primes

• Marginal Utility
  • … equimarginal principle generalize to consumer choice under certainty (demand curves, substitution effects), intertemporal choice with discounting (the consumption Euler equation $U'(c_t) = \beta (1 + r) U'(c_{t+1})$ equates marginal utilities across time periods, weighted by the discount factor and real interest rate)
• Risk Aversion
  • … uncertainty, crop choice, adoption of new technologies); in health economics (insurance demand, willingness-to-pay for safety); in behavioral economics (departures from expected utility under prospect theory) ; in game theory (risk-dominance as a selection criterion); in macroeconomics (consumption-based asset pricing

    This sourceDerives equilibrium asset prices in a pure-exchange economy of identical agents, founding the consumption-based asset-pricing (CCAPM) framework in which risk premia depend on the covariance of returns with marginal utility of consumption.

    Supported in partVerified against the publisher's abstract

    Lucas (1978) supplies only the macro item: a pure-exchange equilibrium asset-pricing model with identical consumers; the other listed fields are not addressed.

    “THIS PAPER IS A THEORETICAL examination of the stochastic behavior of equilibrium asset prices in a one-good, pure exchange economy with identical consumers.”

    Read by an automated reader; not a human review. How support was checked

Verification

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