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A three-period extension of the CAPM

Author

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  • Helga Habis

Abstract

Purpose - Our result of this paper aims to indicate that the beta pricing formula could be applied in a long-term model setting as well. Design/methodology/approach - In this paper, we show that the capital asset pricing model can be derived from a three-period general equilibrium model. Findings - We show that our extended model yields a Pareto efficient outcome. Practical implications - The capital asset pricing model (CAPM) model can be used for pricing long-lived assets. Social implications - Long-term modelling and sustainability can be modelled in our setting. Originality/value - Our results were only known for two periods. The extension to 3 periods opens up a large scope of applicational possibilities in asset pricing, behavioural analysis and long-term efficiency.

Suggested Citation

  • Helga Habis, 2024. "A three-period extension of the CAPM," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 51(9), pages 200-211, February.
    • Handle: RePEc:eme:jespps:jes-11-2023-0640
    DOI: 10.1108/JES-11-2023-0640
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    Cited by:

    1. Habis, Helga, 2024. "Procrastination and intertemporal consumption: A three-period extension of the CAPM with irrational agents," Finance Research Letters, Elsevier, vol. 63(C).
    2. Abdulnasser Hatemi-J, 2024. "An Asymmetric Capital Asset Pricing Model," Papers 2404.14137, arXiv.org, revised May 2024.

    More about this item

    Keywords

    General equilibrium; CAPM; Intertemporal choice; Pareto efficiency; D53; G12; D15;
    All these keywords.

    JEL classification:

    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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