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Necessary and sufficient conditions on Gorman aggregation in securities markets with heterogeneous beliefs

Huang, James and Adam-Mueller, Axel (2012) Necessary and sufficient conditions on Gorman aggregation in securities markets with heterogeneous beliefs. Working Paper. Lancaster University, Lancaster.

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Abstract

Given a group of agents who have divergent beliefs and heterogeneous preferences, we derive a necessary and sufficient condition for the group's aggregate demand for securities to be independent of initial wealth distributions. We also present a necessary and sufficient condition for asset prices to be independent of initial wealth distributions in an economy with heterogeneous beliefs. Contrary to the common belief in the literature, equicautious HARA utility functions are not necessary for Gorman aggregation in securities markets.

Item Type: Monograph (Working Paper)
Uncontrolled Keywords: Gorman aggregation ; demand for securities ; contingent-claim pricing ; heterogeneous beliefs
Subjects: H Social Sciences > HF Commerce > HF5601 Accounting
Departments: Lancaster University Management School > Accounting & Finance
ID Code: 58956
Deposited By: ep_importer_pure
Deposited On: 08 Oct 2012 13:41
Refereed?: No
Published?: Published
Last Modified: 30 Sep 2014 10:50
Identification Number:
URI: http://eprints.lancs.ac.uk/id/eprint/58956

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