Lucas (1978) and Breeden (1979) proposed the consumption CAPM (CCAPM) using the ICAPM framework of Merton (1973).

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Lucas (1978) and Breeden (1979) proposed the consumption CAPM

(CCAPM) using the ICAPM framework of Merton (1973). In this model, consumers buy and sell financial assets over time to smooth consumption and maximize lifetime expected utility. What assets will consumers seek? Why?

How does it affect the risk premiums on these assets? What happens to other assets?

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Investment Valuation And Asset Pricing Models And Methods

ISBN: 9783031167836

1st Edition

Authors: James W. Kolari, Seppo Pynnönen

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Question Posted: Mar 03, 2024 02:00 AM

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Lucas (1978) and Breeden (1979) proposed the consumption CAPM (CCAPM) using the ICAPM framework of Merton (1973).

Question:

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DETAILED SOLUTION In the consumption CAPM CCAPM model consumers make decisions about buying and selling financial assets to optimize their lifetime expected utility and smooth their consumption over t...View the full answer

Investment Valuation And Asset Pricing Models And Methods

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