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
Risk efficiency using stochastic dominance and expected gain‐confidence limits
Lindon J. Robison,Peter J. Barry +1 more
TL;DR: The normality assumption can be more easily justified; however, it may be inappropriate for many investment situations as mentioned in this paper, because it eventually exhibits declining total utility as wealth increases and they imply increasing absolute risk aversion-results that seem inconsistent with commonly observed risk behavior
Journal ArticleDOI
Risk assessment of failure events with severity exceedance
TL;DR: The location of an individual airport triplet on a risk cube, with regions determined by a family of airports, illustrates the potential for identifying unusual performance in terms of failure events.
Journal ArticleDOI
Stable Value Funds Performance
David F. Babbel,Miguel Herce +1 more
TL;DR: In this paper, a composite index of stable value returns is presented, which includes mean-variance analysis, Sharpe and Sortino ratio analysis, stochastic dominance analysis, and optimal multi-period portfolio composition analysis.
Journal ArticleDOI
Comparative riskiness of random vector outcomes
TL;DR: In this article, the authors consider two other criteria for making such comparisons, one of which is a generalization of second-order stochastic dominance, and show that these criteria are equivalent for every convex vector outcome space, and illustrate this usefulness with applications to the theories of auctions, utility regulation, inventory control, portfolio choice, public goods and moral hazard in teams.
Posted ContentDOI
The Evolution of Genetic Bandwagoning
TL;DR: Genetic bandwagoning constitutes a novel mechanism for the evolution of cooperation that uses a combination of resonation and reservation, including the phenotypic cooccurrences of robust defenses against parasites and depressive symptoms.
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.