Hostname: page-component-78c5997874-v9fdk Total loading time: 0 Render date: 2024-11-15T12:45:27.773Z Has data issue: false hasContentIssue false
  • English
  • Français

The Fundamental Theorem of Parameter-Preference Security Valuation

Published online by Cambridge University Press:  19 October 2009

Mark E. Rubinstein
Get access Rights & Permissions [Opens in a new window]

Extract

Under the assumption that individuals are single-period maximizers of the expected utility of their future wealth, this essay extends the mean-variance security valuation model developed by Sharpe [10], Lintner [4, 5, and 6], and Mossin [7 and 8] to a general parameter-preference model, with and without the simplifications of homogeneous subjective probabilities and the existence of a risk-free security. Results with quadratic and cubic utility are developed as special cases.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 8 , Issue 1 , January 1973 , pp. 61 - 69
Copyright
Copyright © School of Business Administration, University of Washington 1973

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

[1]Arrow, K.J. “The Theory of Risk Aversion.” In Essays in the Theory of Risk-Bearing, edited by Arrow, K.J.. Markham, 1971, pp. 90–120. (First published without appendix in 1965 as Lecture 2 in Aspects of the Theory of Risk-Bearing, Yrjö Jahnsson Lectures, Helsinki.)Google Scholar
[2]Cass, D., and Stiglitz, J.E.. “The Structure of Investor Preferences and Asset Returns, and Separability in Portfolio Allocation: A Contribution to the Pure Theory of Mutual Funds.” Journal of Economic Theory, June 1970.CrossRefGoogle Scholar
[3]Hakansson, N.H. “Risk Disposition and the Separation Property in Portfolio Selection.” Journal of Financial and Quantitative Analysis, December 1969.CrossRefGoogle Scholar
[4]Lintner, J. “The Valuation of Risk Assets and the Selection of Risky Investments in Stock Portfolios and Capital Budgets.” Review of Economics and Statistics, February 1965.CrossRefGoogle Scholar
[5]Lintner, J. “The Aggregation of Investor's Diverse Judgments and Preferences in Purely Competitive Markets.” Journal of Financial and Quantitative Analysis, December 1969.CrossRefGoogle Scholar
[6]Lintner, J. “The Market Price of Risk, Size of Market, and Investor's Risk Aversion.” Review of Economics and Statistics, February 1970.CrossRefGoogle Scholar
[7]Mossin, J. “Equilibrium in a Capital Asset Market.” Econometrica, October 1966.CrossRefGoogle Scholar
[8]Mossin, J. “Security Pricing and Investment Criteria in Competitive Markets.” American Economic Review, December 1969.Google Scholar
[9]Rubinstein, M.E. “A Comparative Statics Analysis of Risk Premiums.” Forthcoming in Journal of Business.Google Scholar
[10]Sharpe, W.F.Portfolio Theory and Capital Markets. New York: McGraw-Hill, 1970.Google Scholar
[11]Tobin, J. “Comment on Borch and Feldstein.” Review of Economic Studies, January 1969.CrossRefGoogle Scholar