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Mutual Fund Separation in Financial Theory—The Separating Distributions

In: Theory Of Valuation

Author

Listed:
  • STEPHEN A. ROSS

    (School of Organization and Management and Department of Economics, Yale University, New Haven, Connecticut 06520, USA)

Abstract

AbstractThis paper finds necessary and sufficient conditions on the stochastic structure of asset returns for portfolio choice to be equivalent to choice among a limited number of mutual funds of assets, independent of investors' preferences. This type of separation result is central to modern financial theory and the distributions which satisfy these conditions, the separating distributions, form the underlying basis for much of this theory.

Suggested Citation

  • Stephen A. Ross, 2005. "Mutual Fund Separation in Financial Theory—The Separating Distributions," World Scientific Book Chapters,in: Theory Of Valuation, chapter 10, pages 309-356 World Scientific Publishing Co. Pte. Ltd..
  • Handle: RePEc:wsi:wschap:9789812701022_0010
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    Keywords

    Asset Pricing; Financial Theory; Valuation; Term Structure; Interest Rates; Options; Portfolios; Taxes; Transaction Costs;

    JEL classification:

    • G00 - Financial Economics - - General - - - General

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