التفاصيل البيبلوغرافية
| العنوان: |
Mean-Variance Utility Functions and the Demand for Risky Assets: An Empirical Analysis Using Flexible Functional Forms. |
| المؤلفون: |
Aivazian, Varouj A., Callen, Jeffrey L., Krinsky, Itzhak, Kwan, Clarence C.Y. |
| المصدر: |
Journal of Financial & Quantitative Analysis; Dec83, Vol. 18 Issue 4, p411-424, 14p |
| مصطلحات موضوعية: |
UTILITY functions, INVESTMENT analysis, RISK assessment, RATIO analysis, FINANCIAL risk, INVESTMENT analysis -- Mathematical models |
| مستخلص: |
In a recent study, Levy and Markowitz [15] demonstrate that, at least for some utility functions, expected utility can be approximated by a judiciously chosen function defined over mean and variance. In addition to resurrecting mean-variance analysis from the limbo into which it was placed by the criticisms of Borch [10] and others, the analysis by Levy and Markowitz yields a more direct approach to portfolio analysis than that provided by the current empirical literature. The current portfolio literature is concerned with notions of efficient sets and systematic risk rather than with utility functions and mean-variance. While much has been gained from a utility-free methodology, it is ultimately predicated upon a separation theorem and, hence, an environment with zero transactions costs. But security markets are not costless and the separation theorem may not hold. In that event, a utility-dependent approach to portfolio analysis could potentially lead to more powerful results especially if such an approach could be empirically implemented. As one step toward the implementation of a utility-dependent portfolio methodology, we empirically estimate a family of flexible functional form utility functions (defined over mean and variance). These flexible functional forms arc second-order approximations to the underlying utility function, whatever that true unknown utility function may be. From this family of approximations, we choose the one specific form that best approximates the portfolio decisions of the household sector. Specifically, we select a generalized Box-Cox (flexible functional-form) utility function that takes on the generalized Leontief, generalized square root quadratic, and translog utility functions as special or limiting cases. Budget share equations for risky assets are subsequently generated from the generalized Box-Cox utility function using a straightforward portfolio optimization framework. These budget share equations are then estimated... [ABSTRACT FROM AUTHOR] |
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