| Summary: | This paper develops explicit pricing models under a Gaussian, single
period CARA utility based model in segmented markets that possess
specific structure, referred to as hierarchical. The hierarchical structure
allows us to present general asset pricing formulas, analyze the portfolio holdings of investor groups, and determine welfare implications.
Furthermore, we are able to recover a
number of previous results as special cases of hierarchical segmentation.
Finally, our findings shed new light on the formation
of segmented markets, and indicate that segmentation is likely to
exist even in equilibrium. |
