IDEAS home Printed from https://ideas.repec.org/a/oup/ajagec/v73y1991i2p436-445..html
   My bibliography  Save this article

Robustness of the Mean-Variance Model with Truncated Probability Distributions

Author

Listed:
  • Steven D. Hanson
  • George W. Ladd
  • Charles F. Curtiss

Abstract

The known sufficient conditions for the mean-variance framework to produce expected utility results are violated in the presence of truncated probability distributions. A theoretical simulation is conducted to examine the ability of the linear mean-variance model to approximate expected utility results when the income distribution is truncated by the use of commodity option contracts. The mean-variance model is shown to produce solutions that are close approximations to the expected utility model results under the assumptions of constant absolute risk aversion and normally distributed prices. However, some inconsistency was found between the comparative static results of the two models.

Suggested Citation

  • Steven D. Hanson & George W. Ladd & Charles F. Curtiss, 1991. "Robustness of the Mean-Variance Model with Truncated Probability Distributions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(2), pages 436-445.
  • Handle: RePEc:oup:ajagec:v:73:y:1991:i:2:p:436-445.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.2307/1242728
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:ajagec:v:73:y:1991:i:2:p:436-445.. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://edirc.repec.org/data/aaeaaea.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.