Equilibrium in the Pricing of Capital Assets, Risk-bearing Debt Instruments, and the Question of Optimal Capital Structure: A Reply

Although Imai and Rubenstein are correct that our proof — that the Miller- Modiglianl (M-M) and Sharpe-Lintner-Mossin (S-L-M) capital asset pricing models are mutually consistent — is incomplete, their comments indicate some confusion about the relationships involved in the equilibrium pricing of as...

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Veröffentlicht in:	Journal of financial and quantitative analysis 1972-09, Vol.7 (4), p.2005-2008
Hauptverfasser:	Haugen, Robert A., Pappas, James L.
Format:	Artikel
Sprache:	eng
Schlagworte:	Capital assets Capital costs Capital market equilibrium Capital structure Communications Debt Equilibrium prices Equity securities Expected rate of return Market equilibrium prices Market portfolios
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container_end_page	2008
container_issue	4
container_start_page	2005
container_title	Journal of financial and quantitative analysis
container_volume	7
creator	Haugen, Robert A. Pappas, James L.
description	Although Imai and Rubenstein are correct that our proof — that the Miller- Modiglianl (M-M) and Sharpe-Lintner-Mossin (S-L-M) capital asset pricing models are mutually consistent — is incomplete, their comments indicate some confusion about the relationships involved in the equilibrium pricing of assets in these models. Further, they seem to imply that Stiglitz's proof in terms of dollar returns is in some sense superior to a proof in terms of rates of return. This is erroneous. Accordingly, we shall further clarify the relationships inherent in the models and correct our presentation of the proof of the invariance of capital costs in the context of the S-L-M model.
doi_str_mv	10.2307/2329632
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Further, they seem to imply that Stiglitz's proof in terms of dollar returns is in some sense superior to a proof in terms of rates of return. This is erroneous. 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Financ. Quant. Anal</addtitle><description>Although Imai and Rubenstein are correct that our proof — that the Miller- Modiglianl (M-M) and Sharpe-Lintner-Mossin (S-L-M) capital asset pricing models are mutually consistent — is incomplete, their comments indicate some confusion about the relationships involved in the equilibrium pricing of assets in these models. Further, they seem to imply that Stiglitz's proof in terms of dollar returns is in some sense superior to a proof in terms of rates of return. This is erroneous. 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subjects	Capital assets Capital costs Capital market equilibrium Capital structure Communications Debt Equilibrium prices Equity securities Expected rate of return Market equilibrium prices Market portfolios
title	Equilibrium in the Pricing of Capital Assets, Risk-bearing Debt Instruments, and the Question of Optimal Capital Structure: A Reply
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