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Elliptical Symmetry and Mean Variance Portfolio Choice

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  • Nelson, Carl H.

Abstract

Results of Chamberlain and Meyer are combined to extend Meyer's location-scale condition to portfolio choice models where the distribution of returns is elliptically symmetric. This extension implies that mean-variance choice is consisteht with expected utility maximizing choice for such models. All expected utility maximizing portfolios lie on the mean-variance efficiency frontier which can be generated with quadratic risk programming. A test for elliptical symmetry is also described. This test enables one to determine whether a given set of portfolio data satisfies the conditions which make mean-variance choice consistent with expected utility maximization.

Suggested Citation

  • Nelson, Carl H., 1990. "Elliptical Symmetry and Mean Variance Portfolio Choice," 1990 Quantifying Long Run Agricultural Risks and Evaluating Farmer Responses to Risk Meeting, January 28-31, 1990, Sanibel Island, Florida 271543, Regional Research Projects > S-232: Quantifying Long Run Agricultural Risks and Evaluating Farmer Responses to Risk.
    • Handle: RePEc:ags:rrsr90:271543
    DOI: 10.22004/ag.econ.271543
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    References listed on IDEAS

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    6. Meyer, Jack, 1987. "Two-moment Decision Models and Expected Utility Maximization," American Economic Review, American Economic Association, vol. 77(3), pages 421-430, June.
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