BFS 2002

Contributed Talk




Aggregation of heterogeneous beliefs and adjusted CCAPM

Elys Jouini, Clotilde Napp


We present a method to aggregate heterogeneous individual beliefs, given a competitive equilibrium in a dynamic complete financial market, into a single "market probability, such that it generates, if shared by all agents, the same marginal valuation of assets by the markets as well as by each individual investor.
In this process the market portfolio may have to be scalarly adjusted and we derive from there an adjusted CCAPM formula where the adjustment coefficient summarizes the heterogeneity of the beliefs.