Work

Non-Negative Equilibrium Prices and Market Portfolio Under Minimax Diversification with Non-Homogeneous Investors

Year: 2025

Type: article

Abstract: Market equilibrium is characterized by a state wherein aggregate demand equals aggregate supply for all assets, a condition arising from consumers maximizing utility within budget constraints and producers maximizing profits. This paper investigates a financial market populated by non-homogeneous investors who may employ heterogeneous deviation measures to formulate their risk functions. By integrating the minimax risk diversification principle with the framework of individual utility maximization, we analytically derive the master fund for each investor. Furthermore, we establish the necessary and sufficient conditions for the existence of a unique non-negative equilibrium price system for risky assets and provide its explicit formula. A key finding is that the market portfolio is a convex combination of all investors’ master funds.

Source: Axioms

DOI: 10.3390/axioms14120918

Authors: Hongyu Yang, Jia Liu, Zijian Luo

Institution: Civil Aviation Flight University of China

Language: English

Topic: Economic theories and models

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: gold

Estimated APC paid: $2,896

Funder: Fundamental Research Funds for the Central Universities