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dc.contributor.authorShapiro, Alexander-
dc.date.accessioned2008-05-31T07:24:11Z-
dc.date.available2008-05-31T07:24:11Z-
dc.date.issued1999-09-
dc.identifier.urihttp://hdl.handle.net/2451/27369-
dc.description.abstractThis paper analyzes equilibrium in a dynamic pure-exchange economy under a generalization of Merton's (1987) investor recognition hypothesis (IRH). Because of information costs, a class of investors is assumed to possess incomplete information, which suffices to implement only a particular trading strategy. The IRH is mapped into corresponding portfolio restrictions that bind a subset of agents. The model is formulated in continuous time, and detailed characterization of equilibrium quantities is provided. The model implies that, all else equal, a risk premium on a less visible stock need not be higher than that on a more visible stock with a lower volatility -- contrary to results derived in a static mean-variance setting. An empirical analysis suggests that a consumption-based capital asset pricing model (CCAPM) augmented by the IRH is a more realistic model than the traditional CCAPM for explaining the cross-sectional variation in unconditional expected equity returns.en
dc.language.isoen_USen
dc.relation.ispartofseriesS-MF-99-11en
dc.titleThe Investor Recognition Hypothesis in a Dynamic General Equilibrium: Theory and Evidenceen
dc.typeWorking Paperen
Appears in Collections:Macro Finance

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