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
Performance Evaluation of Investment Funds with DEA and Higher Moments Characteristics: Financial Engineering Perspective
TL;DR: In this paper, data envelopment analysis (DEA) is used to evaluate the performance of the funds in the consideration of higher moments, and the results show that the evaluation score is related to the utility preference of the investors, which indicates that evaluation results are more realistic and consistent with the investors' preference.
Journal ArticleDOI
Portfolio Selection and Investors' Utility: a Graphical Analysis
Haim Levy,Marshall Sarnat +1 more
TL;DR: In this paper, a graphical analysis of portfolio selection and investors' utility is presented, showing that the utility of a portfolio is proportional to the number of stocks in the portfolio.
Journal ArticleDOI
A Comparative Study of Gini's Mean Difference and Mean Variance in Portfolio Analysis
TL;DR: The mean Gini model is similar in nature to the mean variance model in that it uses a two-parameter statistic to describe the probability distribution of risky returns as mentioned in this paper, which is consistent with the behaviour of investors under conditions of uncertainty for a wider class of probability distributions.
Journal ArticleDOI
A linear programming algorithm for determining mean-Gini efficient farm plans
John Okunev,John L. Dillon +1 more
TL;DR: A linear programming algorithm is presented for determination of farm plans that are efficient under the mean-Gini criterion and the set of efficient plans is compared with those based on meanvariance and MOTAD analysis of the same problem.
Journal ArticleDOI
Screening policy options: An approach and a case study example
TL;DR: Screening procedures in the context of developing an understanding of, and dialogue about, strategic problems is examined to provide a ‘thinking structure’ for policy type problems.
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.