Dichotomous Asset Pricing Model
نویسندگان
چکیده
Cross-asset derivative securities are studied and a dichotomous asset pricing model (DAPM) is derived that significantly enriches the Sharpe-Lintner-Black capital asset pricing model. An assets beta is shown to be observable ex ante through the price of its cross-market call or put, and the DAPM separately predicts the assets’ expected return beta relations under the upper-market and lower-market conditions. A sufficient condition for the DAPM to hold is that assets return distributions satisfy Ross’ (1978) two-fund separation property, which implies that any well-diversified portfolio is both mean-variance and gain-loss efficient. c © 2005 Peking University Press
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