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Portfolio Selection Under Exponential And Quadratic Utility


  • Buccola, Steven T.


The production or marketing portfolio that is optimal under the assumption of quadratic utility may or may not be optimal under the assumption of exponential utility. In certain cases, the necessary and sufficient condition for an identical solution is that absolute risk aversion coefficients associated with the two utility functions be the same. In other cases, equality of risk aversion coefficients is a sufficient condition only. A comparison is made between use of exponential and quadratic utility in the analysis of a California farmerÂ’s marketing problem.

Suggested Citation

  • Buccola, Steven T., 1982. "Portfolio Selection Under Exponential And Quadratic Utility," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 7(01), July.
  • Handle: RePEc:ags:wjagec:32418

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    References listed on IDEAS

    1. Kallberg, J. G. & Ziemba, W. T., 1979. "On the robustness of the Arrow-Pratt risk aversion measure," Economics Letters, Elsevier, vol. 2(1), pages 21-26.
    2. Anderson, Jock R. & Feder, Gershon, 2007. "Agricultural Extension," Handbook of Agricultural Economics, Elsevier.
    3. David A. Bessler, 1980. "Aggregated Personalistic Beliefs on Yields of Selected Crops Estimated Using ARIMA Processes," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 62(4), pages 666-674.
    4. Hanoch, Giora & Levy, Haim, 1970. "Efficient Portfolio Selection with Quadratic and Cubic Utility," The Journal of Business, University of Chicago Press, vol. 43(2), pages 181-189, April.
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    Cited by:

    1. Zuhair, Sugu M.M. & Taylor, Daniel B. & Kramer, Randall A., 1992. "Choice of utility function form: its effect on classification of risk preferences and the prediction of farmer decisions," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 6(4), April.
    2. Babcock, Bruce A. & Choi, E. Kwan & Feinerman, Eli, 1993. "Risk And Probability Premiums For Cara Utility Functions," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 18(01), July.
    3. repec:spr:annopr:v:237:y:2016:i:1:d:10.1007_s10479-014-1702-7 is not listed on IDEAS
    4. Feinerman, Eli & Shani, Y. & Bresler, E., 1989. "Economic Optimisation Of Sprinkler Irrigation Considering Uncertainty Of Spatial Water Distribution," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 33(02), August.

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