The Econometric SocietyEdited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262
Econometrica: Oct, 1966, Volume 34, Issue 4
https://doi.org/0012-9682(196610)34:4<768:EIACAM>2.0.CO;2-3
p. 768-783
Jan Mossin
This paper investigates the properties of a market for risky assets on the basis of a simple model of general equilibrium of exchange, where individual investors seek to maximize preference functions over expected yield and variance of yield on their portfolios. A theory of market risk premiums is outlined, and it is shown that general equilibrium implies the existence of so-called "market line," relating per dollar expected yield and standard deviation of yield. The concept of price of risk is discussed in terms of the slope of this line.
