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Capital Market Equilibrium with Divergent Investment Horizon Length Assumptions

Published online by Cambridge University Press:  06 April 2009

John E. Gilster Jr
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Extract

The Sharpe-Lintner Capital Asset Pricing Model (CAPM) has always contained an implicit question: what if all investors are single-period wealth maximizers but the length of the single period varies across investors? Gressis, Philappatos, and Hayya (GPH) [7] have pointed out that as the assumption of investment horizon length is changed, the Capital Market Line (CML) intersects the Efficient Frontier (EF) at different points causing different investors to hold different efficient portfolios. GPH assert that these different portfolio holdings will result in an inefficient market portfolio—and dire consequences for the capital market model.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 18 , Issue 2 , June 1983 , pp. 257 - 268
Copyright
Copyright © School of Business Administration, University of Washington 1983

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