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xls
Mossin - Example
Data (see Mossin p. 49) Rescaled data
State of the world (to calculate covariances)
Firms s=1 s=2 s=3 s=1 s=2 s=3
X1 0 1 1 0.00 0.50 0.50
X2 1 1 2 0.71 0.50 1.00
Proba 0.5 0.25 0.25
b bj=Sk(sjk)
Firm 1 0.375
Firm 2 0.313
Sum 0.688
l 0.267 Market risk aversion
Endowment Zij
Firm 1 Firm 2 Wealth
Investor 1 1.000 0.000 $0.40
Investor 2 0.000 1.000 $1.17
$1.57
Equilibrium zi1 zi2 Risk-free
Investor 1 0.5339 0.5339 -$0.44
Investor 2 0.4661 0.4661 $0.44
$ Risk-free Wealth
Investor 1 $0.21 $0.62 $0.84 -$0.44 $0.40
25.5% 74.5%
Investor 2 $0.19 $0.54 $0.73 $0.44 $1.17
25.5% 74.5%
Market $0.40 $1.17 $1.57
25.5% 74.5%