Accession Number : ADA186024

Title :   Portfolio Theory for the Optimized-Certainty-Equivalent Maximizing Investor.

Descriptive Note : Technical rept.,

Corporate Author : TEXAS UNIV AT AUSTIN CENTER FOR CYBERNETIC STUDIES

Personal Author(s) : Ben-Tal, A ; Teboulle, M

PDF Url : ADA186024

Report Date : May 1987

Pagination or Media Count : 34

Abstract : The portfolio selection problem with one safe asset and risky assets is analyzed via a new decision theoretic criterion: the Optimized Certainty Equivalent(OCE), recently introduced by the authors. Fundamental results in portfolio theory, previously studied under the Expected Utility criterion (EU), such as separation Theorems, comparative statistics analysis, and threshold values for inclusion or exclusion of risky assets in the optimal portfolio, are obtained here. In contrast to the EU model, our results for the OCE maximizing investor do not impose restrictions on either the utility function or the underlying probability laws. We also derive a dual portfolio selection problem and provide it with economic interpretation.

Descriptors :   *DECISION THEORY, *INVESTMENTS, DECISION MAKING, STATISTICS, THRESHOLD EFFECTS, OPTIMIZATION, RISK, STATISTICAL ANALYSIS

Subject Categories : Operations Research
      Economics and Cost Analysis

Distribution Statement : APPROVED FOR PUBLIC RELEASE