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Our result of this paper aims to indicate that the beta pricing formula could be applied in a long-term model setting as well.
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.
Details