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Optimal Financial Portfolio and Dependence of Risky Assets

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  • K. Dachraoui
  • G. Dionne

Abstract

In this note we analyze the hedging property of an optimal portfolio with one risk-free asset and two risky assets. We make a restriction on the dependence between the two risky assets and show that the sign of the covariance is necessary and sufficient to set the relative investments in the two risky assets of the portfolio for all concave utility functions.
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Suggested Citation

  • K. Dachraoui & G. Dionne, 2000. "Optimal Financial Portfolio and Dependence of Risky Assets," THEMA Working Papers 2000-57, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  • Handle: RePEc:ema:worpap:2000-57
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    File URL: http://www.u-cergy.fr/IMG/documents//2000-57.Dionne.pdf
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    References listed on IDEAS

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    1. Ephraim Clark & Octave Jokung, 1999. "A Note on Asset Proportions, Stochastic Dominance, and the 50% Rule," Management Science, INFORMS, vol. 45(12), pages 1724-1727, December.
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    Cited by:

    1. Satya P. DAS & Chetan CHATE, 2001. "Endogenous Distribution, Politics, and Growth," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2001019, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    2. DENUIT, Michel & SAILLET, Olivier, 2001. "Nonparametric Tests for Positive Quadrant Dependence," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2001009, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 01 Apr 2001.

    More about this item

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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