Journal ArticleDOI
The Efficiency Analysis of Choices Involving Risk
Giora Hanoch,Haim Levy +1 more
TLDR
In this paper, an analysis of the first step of the decision-making process of an individual decision maker among alternative risky ventures is presented, in terms of a single dimension such as money, both for the utility functions and for the probability distributions.Abstract:
Publisher Summary The choice of an individual decision maker among alternative risky ventures may be regarded as a two-step procedure. The decision maker chooses an efficient set among all available portfolios, independently of his tastes or preferences. Then, the decision maker applies individual preferences to this set to choose the desired portfolio. The subject of this chapter is the analysis of the first step. It deals with optimal selection rules that minimize the efficient set by discarding any portfolio that is inefficient in the sense that it is inferior to a member of the efficient set, from point of view of each and every individual, when all individuals' utility functions are assumed to be of a given general class of admissible functions. The analysis presented in the chapter is carried out in terms of a single dimension such as money, both for the utility functions and for the probability distributions. However, the results may easily be extended, with minor changes in the theorems and the proofs, to the multivariate case. The chapter explains a necessary and sufficient condition for efficiency, when no further restrictions are imposed on the utility functions. It presents proofs of the optimal efficiency criterion in the presence of general risk aversion, that is, for concave utility functions.read more
Citations
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Journal ArticleDOI
Financing Decisions and the Theory of the Firm
TL;DR: A firm periodically makes three major classes of decisions that determine its structure as reflected on its balance sheet: the first relates to the total amount of investment as well as the distribution of this total amount among different types of assets, and the second is concerned with the relative proportion of equity versus debt capital to be used in financing the firm as mentioned in this paper.
Journal ArticleDOI
An Experimental Study of Risk Aversion in Decision-making Under Uncertainty
TL;DR: In this article, the authors present the findings of an experimental study of risk aversion in decision-making under uncertainty, where subjects determined the certainty-equivalent wealth of each gamble, measured by the Markowitz risk premium of the decision.
DissertationDOI
Investment, production, and marketing strategies for an Iowa farmer-cattle feeder in a risky environment.
Journal ArticleDOI
Stochastic dominance: A bibliographical rectification and a restatement of whitmore's theorem
TL;DR: In this article, it was shown that the fundamental theorem on stochastic dominance of degree two was discovered in 1932 by Karamata and that the proof is simple and elegant.
Journal ArticleDOI
The unsung impact of currency risk on the performance of international real property investment
TL;DR: In this paper, the authors revisited the currency risk debate to ascertain the statistical significance of currency risk on the return of international real property investment, especially in a period of increased exchange rate volatility.
References
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Journal ArticleDOI
Capital asset prices: a theory of market equilibrium under conditions of risk*
TL;DR: In this paper, the authors present a body of positive microeconomic theory dealing with conditions of risk, which can be used to predict the behavior of capital marcets under certain conditions.
Journal ArticleDOI
The Utility Analysis of Choices Involving Risk
TL;DR: In this paper, the authors suggest that an important class of reactions of individuals to risk can be rationalized by a rather simple extension of orthodox utility analysis, i.e., individuals frequently must, or can, choose among alternatives that differ, among other things, in the degree of risk to which the individual will be subject.
Journal ArticleDOI
The Existence of Probability Measures with Given Marginals
TL;DR: In this article, the existence of probability distributions with given marginals is studied under typically weaker assumptions, than those which are required by the use of Theorem 1, and necessary and sufficient conditions for a sequence of probability measures to be the sequence of distributions of a martingale, an upper semi-martingale or of partial sums of independent random variables.