The Stock Market is Just a Game

42 Pages Posted: 10 May 2004

Multiple version iconThere are 2 versions of this paper

Date Written: January 14, 2004


The CAPM is a powerful tool to analyse stock markets. Yet, empirical anomalies remain, e.g.: the equity premium or low risk free interest rate puzzle, IPO stock price behavior around unlock dates and high trading volumes. This paper links corporate finance and asset pricing models and derives these anomalies as rational equilibrium behaviour. The main ingredient is the observation that a firm's value is endogenous. It depends on effort decisions of shareholders which are determined by their holdings and therefore ultimately by the stock price. It is argued that merging corporate finance and asset pricing helps to further understand stock markets.

Keywords: Asset pricing, corporate finance, equity premium

JEL Classification: G1, G3

Suggested Citation

Lilienfeld-Toal, Ulf von, The Stock Market is Just a Game (January 14, 2004). Available at SSRN: or

Ulf von Lilienfeld-Toal (Contact Author)

Luxembourg School of Finance ( email )

162a, avenue de la Faïencerie
Luxembourg-Limpertsberg, L-1511

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