Portfolio Theory: As I Still See It
AbstractThis essay summarizes my views on (a) the foundations of portfolio theory and its applications to current issues, such as the choice of criteria for practical risk-return analysis, and whether some form of risk-return analysis should be used in fact; (b) hypotheses about actual financial behavior, as opposed to idealized rational behavior, including two proofs of the fact that expected-utility maximizers would never prefer a multiple-prize lottery to all single-prize lotteries, as asserted in one of my 1952 papers; and (c) a simple proof of the theorem (which was initially greeted with some skepticism, especially by referees) that investors in capital asset pricing models do not get paid for bearing risk.
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Bibliographic InfoArticle provided by Annual Reviews in its journal Annual Review of Financial Economics.
Volume (Year): 2 (2010)
Issue (Month): 1 (December)
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- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
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- Markowitz, Harry, 2014. "Mean–variance approximations to expected utility," European Journal of Operational Research, Elsevier, vol. 234(2), pages 346-355.
- Viole, Fred & Nawrocki, David, 2013. "An analysis of heterogeneous utility benchmarks in a zero return environment," International Review of Financial Analysis, Elsevier, vol. 28(C), pages 190-198.
- Ankit Dangi, 2013. "Financial Portfolio Optimization: Computationally guided agents to investigate, analyse and invest!?," Papers 1301.4194, arXiv.org.
- Peel, D.A., 2013. "Heterogeneous agents and the implications of the Markowitz model of utility for multi-prize lottery tickets," Economics Letters, Elsevier, vol. 119(3), pages 264-267.
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