A framework for CAPM with heterogeneous beliefs

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Nonlinear Dynamics in Economics, Finance and the Social Sciences: Essays in Honour of John Barkley Rosser Jr, 2010, 1st, pp. 353 - 369
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The Sharpe~Lintnel~Mossin (Sharpe 1964; Lintner 1965; Mossin 1966) Capital Assel Pricing Model (CAPM) plays a central role in modern finance theory. It is founded on the paradigm of humogeneous beliefs and a rational representarive agent. However, from a theoretical perspective this paradigm has been criticized on a number of grounds, in particular concerning liS: extreme assumptions about homoge~ neous beliefs, information about the economic envlronment, and the computational ability on the part of the ratIonal representative economic agent
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