Advanced Search
MyIDEAS: Login

A Reexamination Of The Relationship Between Preferences And Moment Orderings By Rational Risk Averse Investors

Contents:

Author Info

  • Patrick L. Brockett
  • James R. GARVEN
Registered author(s):

    Abstract

    This paper shows that a flaw exists in the logic behind the previously stated theoretical connections between utility theory and moment preferences. In fact, no such relationship exists. There is also a flaw in the logic that postulates that approximate normality can justify moment (e.g., mean-variance) methods for investors' preferences (it cannot), or even that exact normality can justify the use of mean variance analysis consistent with the von Neumann-Morgenstern rationality axioms except for the quadratic utility. A flaw also exists in attempts to analyze the effect of moment changes "ceteris paribus" since "all else the same" is "all the same." Finally, arguments that claim that empirical evidence supports the use of moment approximations to investors' preferences are logically questionable. In our discussion, we have questioned the logical underpinning of the empirics and provided references to numerous empirical illustrations in which the exact opposite relationship has been found.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://128.118.178.162/eps/fin/papers/9404/9404002.ps.gz
    Download Restriction: no

    Bibliographic Info

    Paper provided by EconWPA in its series Finance with number 9404002.

    as in new window
    Length:
    Date of creation: 23 Apr 1994
    Date of revision:
    Handle: RePEc:wpa:wuwpfi:9404002

    Note: Postscript (ASCII)
    Contact details of provider:
    Web page: http://128.118.178.162

    Related research

    Keywords: Asset preferences; utility functions; moment orderings; Von Report_No: JG#2;

    Find related papers by JEL classification:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpfi:9404002. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.