Estimating Probabilities Relevant to Calculating Relative Risk-Corrected Returns of Alternative Portfolios
In making all-or-none choices between alternative securities, Samuelson (1997) suggested that investors of different risk-aversion should calculate from past samples of those securities their relevant Harmonic Means, or Geometric means, or other associative means representative of their respective degrees of relative-risk-aversion. Here it is shown how this learning procedure can be improved upon when you have prior knowledge that the securities have log-Normal distributions. Classical estimation theory, concerning consistent, efficient, and sufficient statistics, is shown to have a cash value by means of the calculable measure of (ex ante) "risk-corrected certainty equivalents." Needed qualifications and testings are also presented. Copyright 1997 by Kluwer Academic Publishers
When requesting a correction, please mention this item's handle: RePEc:kap:jrisku:v:15:y:1997:i:3:p:191-200. 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: (Sonal Shukla)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.