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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Bt-cotton and secondary pests
TL;DR: Bt-cotton seed has been effective to control the damage of bollworm in Chinese cotton production since 1999, reducing the need for pesticides and increasing incomes of Chinese farmers, but field data collected in 2004 indicates that these benefits have been eroded by increasing the use of pesticides.
Journal ArticleDOI
Evaluating the Potential of Index Insurance Schemes to Reduce Crop Yield Risk in an Arid Region
TL;DR: In this article, the authors evaluate yield risk reduction through weather index, area yield index and farm yield insurance contracts for wheat farms in Kazakhstan by employing data from 1980 to 2002, using the usual mean variance (MV) approach and also a second-degree stochastic dominance (SSD) criterion.
Journal ArticleDOI
Testing for Restricted Stochastic Dominance
TL;DR: In this article, the authors define and focus on restricted stochastic dominance, the only empirically useful form of dominance relation that we can seek to infer in many settings, and propose a test procedure based on an empirical likelihood ratio, which can turn out to provide much improved reliability of inference compared with the asymptotic tests so far proposed in the literature.
Posted Content
Optimal Financial Portfolios
TL;DR: In this paper, the authors consider classes of reward-risk optimization problems that arise from different choices of reward and risk measures and present an algorithm based on a sequence of convex feasibility problems for the general quasi-concave ratio problem.
Journal ArticleDOI
Stochastic Dominance and Risk Measure: A Decision-Theoretic Foundation for VAR and C-Var
Wing-Keung Wong,Chenghu Ma +1 more
TL;DR: Some logical connections are established among VaRs, conditional-VaR, stochastic dominance, and utility maximization among various types of VaR models, including VaR and conditional- VaR, as measures of downside risk.
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.
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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.