Do CAPM results hold in a dynamic economy? A numerical analysis

Akdeniz L., Dechert W. D.

Journal of Economic Dynamics and Control, cilt.21, sa.6, ss.981-1003, 1997 (SSCI) identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 21 Sayı: 6
  • Basım Tarihi: 1997
  • Doi Numarası: 10.1016/s0165-1889(96)00014-0
  • Dergi Adı: Journal of Economic Dynamics and Control
  • Derginin Tarandığı İndeksler: Social Sciences Citation Index (SSCI), Scopus
  • Sayfa Sayıları: ss.981-1003
  • Anahtar Kelimeler: Asset pricing models, Computational economics, Projection methods, Stochastic growth models
  • TED Üniversitesi Adresli: Evet

Özet

In this research we use the projection method (reported by Judd) to find numerical solutions to the Euler equations of a stochastic dynamic growth model. The model that we solve is Brock's asset pricing model for a variety of parameterizations of the production functions. Using simulated data from the model, conjectures (which are not analytically tractable) can be verified. We show that the market portfolio is mean-variance efficient in this dynamic context. We also show a result that is not available from the static CAPM theory: the efficient frontier shifts up and down over the business cycle.