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The CAPM-Extended Divisia Monetary Aggregate with Exact Tracking under Risk

Paper:ewp-fin/9602001
From:    
Date: Mon, 12 Feb 96 17:54:45 CST

Title: The CAPM-Extended Divisia Monetary Aggregate with Exact Tracking under Risk
Author: William A. Barnett (Washington University in St. Louis) and Yi Liu (University of S. Alabama)
Contact:
Comments: Type of Document - Microsoft Word; prepared on Macintosh; to print on Postscript; pages: 24 ; figures: None.. See http://econwpa.wustl.edu:80/~barnett/ on the Web.
Keywords: CAPM Divisia aggregation index risk money
JEL: G1 E4
EWPA-references:
Report-no: WAB-96-2

Abstract:

This paper extends the field of index number theory to the case of risk, by deriving the Divisia index from the Euler equations under risk, rather than from the first order conditions under perfect certainty, as was done by Francois Divisia. The result is an extended Divisia index which corrects for risk by subtracting from each risky user cost price a CCAPM beta term. The formula is derived and illustrated in terms of aggregation over monetary assets that yield risky return paid at the end of the period. Hence the beta correction is a function of the covariance between each rate of return and the consumption stream, and also depends upon the degree of risk aversion.

Postscript files:(viewing .ps)       archive: 9602001.ps or 9602001.ps.gz is 60522 bytes, 8-23-97.
Acrobat pdf files:(viewing .pdf)       archive: 9602001.pdf is 94530 bytes, 10-15-96, or 9602001.pdf.gz
DOC File:       archive: 9602001.doc
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