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
Financial risk of project's cost
Abraham Mehrez,Uri Regev +1 more
TL;DR: The effects of uncertainty of investment costs on the expected gain and budget allocation of a decision-maker are studied using the relationship between riskiness and stochastic dominance to study the problem of centralized vs. non-centralized budget allocation.
Journal ArticleDOI
Computing sets of expected utility maximizing distributions for common utility functions
Paul D. Thistle,John E. Burnett +1 more
TL;DR: In this article, an algorithm for determining the optimal set of distributions for an important class of preferences and general finite sets of alternatives is presented, based on the necessary and sufficient conditions for infinite degree convex stochastic dominance, and implemented using the solutions to a parametric family of linear programming problems.
Mean-variance versus stochastic dominance: Consistency in investment performance indicators for the Chilean mutual funds market
Cristian F. Pinto,Andrés Acuña +1 more
TL;DR: In this article, the authors analyze the consistency of financial investment ordering based on mean-variance and stochastic dominance (SD) approaches in the context of an emerging financial market.
Journal ArticleDOI
Sequential procurement auctions with risk-averse suppliers
TL;DR: In this paper, the authors compare two procurement mechanisms, bundling and unbundling, in a two-stage auction model with risk-averse suppliers, and show that the bundling mechanism is optimal for a buyer and socially desirable if the aggregate risk is below certain thresholds.
Análisis del Efecto Día de Semana en los principales mercados accionarios latinoamericanosaproximación mediante el criterio de Dominancia Estocástica* Analysis of Day of the Week Effect in the main Latin-American stock markets: an approximation through the Stochastic Dominance Criterion
TL;DR: In this paper, the presence of calendar anomalies in the main Latin American stock markets, for the 1993 to 2007 period, was studied, and it was shown that their existence could be due to a problem of data snooping.
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.