Lucas asset pricing model
E455411
asset pricing model
consumption-based asset pricing model
intertemporal choice model
macroeconomic model
rational expectations model
representative agent model
The Lucas asset pricing model is a foundational rational expectations framework in macro-finance that explains asset prices through representative-agent intertemporal consumption choices under uncertainty.
Statements (49)
| Predicate | Object |
|---|---|
| instanceOf |
asset pricing model
ⓘ
consumption-based asset pricing model ⓘ intertemporal choice model ⓘ macroeconomic model ⓘ rational expectations model ⓘ representative agent model ⓘ |
| assumes |
frictionless financial markets
ⓘ
no arbitrage ⓘ perfect competition ⓘ rational expectations about future states ⓘ representative agent with time-separable preferences ⓘ uncertainty about future endowments ⓘ |
| characteristic |
assets are claims to future endowments
ⓘ
prices determined by equilibrium between supply and demand for contingent claims ⓘ representative agent receives stochastic endowment stream ⓘ |
| coreIdea |
asset prices equal discounted expectations of future payoffs
ⓘ
stochastic discount factor equals intertemporal marginal rate of substitution in consumption ⓘ |
| developedBy | Robert E. Lucas Jr. NERFINISHED ⓘ |
| explains |
determinants of risk premia
ⓘ
pricing of risky assets in general equilibrium ⓘ relationship between consumption and asset returns ⓘ |
| field |
asset pricing
ⓘ
financial economics ⓘ macroeconomics ⓘ |
| goal | derive asset prices from optimal consumption and portfolio choice under uncertainty ⓘ |
| implies |
Euler equation for optimal consumption and portfolio choice
ⓘ
pricing kernel based on marginal utility growth ⓘ |
| influenced |
intertemporal CAPM
ⓘ
macro-finance literature ⓘ modern consumption-based asset pricing ⓘ research on equity premium puzzle ⓘ |
| influencedBy |
Arrow–Debreu general equilibrium theory
ⓘ
expected utility theory ⓘ rational expectations hypothesis ⓘ |
| mathematicalFormulation | general equilibrium with stochastic endowment process ⓘ |
| namedAfter | Robert E. Lucas Jr. NERFINISHED ⓘ |
| relatedTo |
Arrow–Debreu asset pricing framework
NERFINISHED
ⓘ
consumption-based CAPM NERFINISHED ⓘ intertemporal CAPM NERFINISHED ⓘ |
| timePeriod | 1970s ⓘ |
| usedFor |
deriving testable implications for asset returns
ⓘ
theoretical benchmark in macro-finance ⓘ |
| usesConcept |
Arrow–Debreu equilibrium
NERFINISHED
ⓘ
complete markets ⓘ intertemporal utility maximization ⓘ marginal utility of consumption ⓘ rational expectations ⓘ representative agent ⓘ stochastic discount factor ⓘ |
Referenced by (1)
Full triples — surface form annotated when it differs from this entity's canonical label.