Increasingly Mean-Seeking Utility Functions and N-Asset Portfolios
The literature exhibits a dearth of comparative static results for n-asset portfolios. This paper shows a necessary and sufficient condition on utility functions for an increase in initial wealth never to decrease expected per-dollar final wealth in optimal n-asset portfolios. For the resulting utility function class the literature provides a measure of relative risk of portfolios; it is shown here that relative risk never decreases in optimal n-asset portfolios as initial wealth rises.
Gelles, G. M., & Mitchell, D. W. (2002). Increasingly Mean-Seeking Utility Functions and N-Asset Portfolios. Quarterly Review of Economics and Finance, 42(5), pp. 911-919. Elsevier.
The definitive version is available at https://doi.org/10.1016/S1062-9769(02)00157-6
Keywords and Phrases
Broadly decreasing relative risk aversion; Mean-seeking; Multi-asset portfolios; Relative risk; Risk-value models; Utility functions
International Standard Serial Number (ISSN)
Article - Journal
© 2002 Board of Trustees of the University of Illinois, All rights reserved.
01 Jan 2002