Journal of Financial Economics Vol. 3 No. 3 1976
Sharing rules and equilibrium in an international capital market under uncertainty
Abstract
International capital market equilibrium is characterized for a world economy in which consumption preferences are defined multiplicatively over many commodities. It is shown that the set of relative asset prices under pure exchange in international capital markets depends on the real purchasing power of nominal payoffs under uncertainty and does not depend on the currency in which the nominal payoffs are denominated. A Sharpe-Lintner type international capital asset pricing model is derived as a special case. Proportional ad valorem commodity taxes and transportation costs are incorporated in the valuation model, interest rate parity and purchasing power parity are reinterpreted under uncertainty, and international differences in borrowing and lending are shown to reflect, in part, differences in risk aversion across countries.
- DOI
- 10.1016/0304-405x(76)90005-2
- Volume
- 3
- Issue
- 3
- Pages
- 233-256
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref