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| Author: | Epstein, L. Wang, T. |
| Title: | Intertemporal asset pricing under knightian uncertainty |
| Journal: | Econometrica
1994 : MAR, VOL. 62:2, p. 283-322 |
| Index terms: | UNCERTAINTY ECONOMICS PRICING |
| Language: | eng |
| Abstract: | In conformity with the Savage model of decision-making, modern asset pricing theory assumes that agents' beliefs about the likelihoods of future states of the world may be represented by a probability measure. As a result, no meaningful distinction is allowed between risk, where probabilities are available to guide choice, and uncertainty, where information is too imprecise to be summarized adequately by probabilities. This paper provides a formal model of asset price determination in which Knightian uncertainty plays a role. |
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