Theoretical Framework for Stock Pricing Process Based on Micro-Economic Decision Model | Zendy

Vitaly Kaganov | Zendy

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Theoretical Framework for Stock Pricing Process Based on Micro-Economic Decision Model

Author(s) -

Vitaly Kaganov

Publication year - 2017

Publication title -

research papers in economics and finance

Language(s) - English

Resource type - Journals

ISSN - 2543-6430

DOI - 10.18559/ref.2017.2.4

Subject(s) - decision process , stock (firearms) , decision model , variable pricing , process (computing) , decision making , economic model , decision making models , business , economics , computer science , financial economics , management science , microeconomics , engineering , operations management , artificial intelligence , mathematical economics , mechanical engineering , purchasing , operating system

The most common model for asset pricing (CAPM) is problematic and does not match the reality. In this article, I introduce a theoretical framework for a new model which aims at avoiding the problems of CAPM and keeping its advantages, therefore allowing universality of asset pricing. The model is built on the economic principles, using a budget constraint and a Risk Appetite (RA) function. It is based on the micro-economic decision model, involving an expected value and dividing a stock price to objective and subjective prices. As a result, rational based individuals, just like individuals with non-rational factors, may use the model to calculate a future price stock in exactly the same way.

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