Optimal policies for selling a risky depreciable asset with proportional taxes and transaction costs are derived for a representative investor who maximizes the market value of his investment. Also calculated are the market value of his investment and the competitive price of the depreciable asset. Depending upon the values of various parameters, the investor realizes either capital gains and no losses, capital losses and no gains, or neither gains nor losses. Additional properties of the solution are derived numerically.

Assuming continuous trading in continuous time with Brownian motion processes, the basic capital asset pricing model of Sharpe, Lintner, and Mossin is developed under arbitrary distributions of investors' beliefs consistent with available information. Results on the processing of information are reported, and properties of investors' portfolios are derived.

Nonsynchronous trading of securities introduces into the market model a potentially serious econometric problem of errors in variables. In this paper properties of the observed market model and associated ordinary least squares estimators are developed in detail. In addition, computationally convenient, consistent estimators for parameters of the market model are calculated and then applied to daily returns of securities listed in the NYSE and ASE.