Abstract
This paper provides the inter-temporal capital asset pricing model with incomplete information and short sales constraints. We derive the general equilibrium market equation and the security market line of the “classical” capital asset pricing model in continuous time in the presence of incomplete information and short sales.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
Azman-Saini, W. N. W., Baharumshah, A. Z., & Law, S. H. (2010). Foreign direct investment, economic freedom and economic growth: International evidence. Economic Modelling, 27(5), 1079–1089.
Beber, A., & Pagano, M. (2013). Short-selling bans around the world: Evidence from the 2007–09 crisis. Journal of Finance, 68(1), 343–381.
Bellalah, M., & Wu, Z. (2002). A model for market closure and international portfolio management within incomplete information. International Journal of Theoretical and Applied Finance, 5(5), 479–495.
Bellalah, M., & Wu, Z. (2008). A simple model of corporate international investment under incomplete information and taxes. Annals of Operation Research, 165, 123–143.
Bellalah, M., & Zhang, D. (2016). A general theory of corporate international investment under incomplete information, short sales and Taxes. Economic Modelling, 58, 615–626.
Bellalah, M., & Zhang, D. (2017). A model for international capital markets closure in an economy with incomplete markets and short sales. Economic Modelling, 2017, 316–324.
Boehmer, E., Jones, C. M., & Zhang, X. (2013). Shackling short sellers: The 2008 shorting ban. Review of Financial Studies, 26(6), 1363–1400.
Boehmer, E., & Wu, J. (2013). Short selling and the price discovery process. Review of Financial Studies, 26(2), 287–322.
Breeden, D. (1979). An intertemporal asset pricing model with stochastic consumption and investment opportunities. Journal of Financial Economics, 7(3), 265–296.
Merton, R. C. (1971). Optimum consumption and portfolio rules in a continuous time model. Journal of Economic Theory, 3(4), 373–413.
Merton, R. C. (1973). An intertemporal capital asset pricing model. Econometrica, 41(5), 867–887.
Merton, R. C. (1987). A simple model of capital market equilibrium with incomplete information. Journal of Finance, 42, 483–510.
Nezafat, P., Schroder, M. D., & Wang, Q. (2015). Information acquisition and asset prices with short-sale constraints. http://ssrn.com/abstract=2257093 or http://dx.doi.org/10.2139/ssrn.2257093.
Vasicek, A. (2013). General equilibrium with heterogeneous participants and discrete consumption times. Journal of Financial Economics, 108(2013), 608–614.
Verona, F. (2014). Investment dynamics with information costs. Journal of Money Credit and Banking, 46(8), 1627–1656.
Wu, C., Li, Q., & Wei, K. C. (1996). incomplete information capital market equilibrium with heterogonous expectations and short sale restrictions. Review of Quantitative Finance and Accounting, 7, 119–136.
Wu, Z., & Xu, W. (1996). A direct method in optimal portfolio and consumption choice. Applied Mathematics. A Journal of Chinese Universities, Series B, 11, 349–354.
Funding
This author is supported in part by Natural Science Foundation of China Grant #11401345.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Bellalah, M., Zhang, D. An intertemporal capital asset pricing model under incomplete information and short sales. Ann Oper Res 281, 143–159 (2019). https://doi.org/10.1007/s10479-018-2909-9
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10479-018-2909-9