TY  - JOUR
AU  - Svensson,Lars E.O.
TI  - Portfolio Choice and Asset Pricing With Nontraded Assets
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2774
PY  - 1988
Y2  - November 1988
UR  - http://www.nber.org/papers/w2774
L1  - http://www.nber.org/papers/w2774.pdf
N1  - Author contact info:
Lars E.O. Svensson
Sveriges Riksbank
SE-103 37 Stockholm
SWEDEN
Tel: +46 8 787 0107
Fax: +46 8 21 0531
E-Mail: lars.svensson@iies.su.se
AB  - This paper examines portfolio choice and asset pricing when some assets are nontraded, for instance when a country cannot trade claims to its output on world capital markets, when a government cannot trade claims to future tax revenues, or when an individual cannot trade claims to his future wages. The close relation between portfolio choice with and implicit pricing of nontraded assets is emphasized. A variant of Cox, Ingersoll and Ross's Fundamental Valuation Equation is derived and used to interpret the optimal portfolio. Explicit solutions are presented to the portfolio and pricing problem for some special cases, including when income from the nontraded assets is a diffusion process, not spanned by traded assets, and affected by a state variable.
ER  -