Ordered Mean Difference Benchmarking, Utility Generators, and Capital Market Equilibrium
Designed as a fund performance measure, the ordered mean difference is extended to characterize zero-surplus situations, such as a capital market equilibrium generated by arbitrary risk preferences. This enables nonparametric testing for whether CAPM applies and the detection of pricing inefficiencies or anomalies from historical data, including international capital market segmentation. Any risk-averse utility function can be decomposed into a weighted average of elementary put option profiles ("gnomic" utility functions), which collectively generate the OMD areas. The investor's risk profile can be summarized as a representative gnome, so can the market risk premium. Pricing efficiency turns on whether such a representative gnome exists.
When requesting a correction, please mention this item's handle: RePEc:ucp:jnlbus:v:78:y:2005:i:2:p:441-468. 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: (Journals Division)
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.