In this paper, I present a theory of dynamic economic growth, business cycles, and asset pricing that integrates (1) Marx's idea (and emphasized by Klein) of a two-class heterogeneity of the ownership structure of physical capital and human capital in a capitalist society, (2) Keynes' idea of...

Under the assumption of normally distributed returns, we analyzewhether the Cumulative Prospect Theory of Tversky and Kahneman (1992) is consistent with the Capital Asset Pricing Model. We find that in every financial market equilibrium the Security Market Line Theorem holds....

Markowitz and Sharpe won the Nobel Prize in Economics more than a decade ago for the development of Mean-Variance analysis and the Capital Asset Pricing Model (CAPM). In the year2002, Kahneman won the Nobel Prize in Economics for the development of Prospect Theory....

Markowitz and Sharpe won the Nobel Prize in Economics more than a decade ago for the development of Mean-Variance analysis and the Capital Asset Pricing Model (CAPM). In the year 2002, Kahneman won the Nobel Prize in Economics for the development of Prospect Theory. Can these two apparently...

As early as 1934 Graham and Dodd conjectured that excess returns from value investment originate from a tendency of markets to converge towards fundamental values. This paper confirms their insights theoretically within the evolutionary finance model of Evstigneev, Hens, and Schenk-Hopp (2006)...

Under the assumption of normally distributed returns, we analyzewhether the Cumulative Prospect Theory of Tversky and Kahneman (1992)is consistent with the Capital Asset Pricing Model. We find that in everyfinancial market equilibrium the Security Market Line Theorem holds.However, under the...

This paper studies the asset pricing implications of a general equi-librium model in which real investment is reversible at a cost. Firmsface higher costs in contracting than in expanding their capital stockand decide to invest when their productive capital is scarce relativeto the overall...

We introduce a new class of flexible and tractable matrix a±ne jump-diffusions (AJD) to modelmultivariate sources of financial risk. We first provide a complete transform analysis of this model class,which opens a range of new potential applications to, e.g., multivariate option pricing with...

We study the existence of dynamic equilibria with endogenously complete markets incontinuous-time, heterogenous agents economies driven by diusion processes. Ourmain results show that under appropriate conditions on the transition density ofthe state variables, market completeness can be deduced...

This article shows that, as long as agents are required to maintain positivewealth, the presence of portfolio constraints may give rise to asset pricingbubbles in equilibrium even if there are unconstrained agents in the economywho can benefit from the induced arbitrage opportunity. Furthermore,...