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Can Market Incompleteness Resolve Asset Pricing Puzzles?

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  • Mark C. Freeman

Abstract

This paper shows that the presence of persistent uninsurable risk concentrated in economic depressions has the potential to resolve two well‐known asset pricing puzzles. It is also shown that the presence of such risk in more normal economic expansions and recessions is likely to be much less relevant in determining equilibrium asset prices.

Suggested Citation

  • Mark C. Freeman, 2004. "Can Market Incompleteness Resolve Asset Pricing Puzzles?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 31(7‐8), pages 927-949, September.
    • Handle: RePEc:bla:jbfnac:v:31:y:2004:i:7-8:p:927-949
    DOI: 10.1111/j.0306-686X.2004.00562.x
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