PORTFOLIO ANALYSIS CONSIDERING ESTIMATION RISK AND IMPERFECT MARKETS

Mean-variance efficient portfolio analysis is applied to situations where not all assets are perfectly price elastic in demand nor are asset moments known with certainty. Estimation and solution of such a model are based on an agricultural banking example. The distinction and advantages of a Bayesian formulation over a classical statistical approach are considered. For maximizing expected utility subject to a linear demand curve, a negative exponential utility function gives a mathematical programming problem with a quartic term. Thus, standard quadratic programming solutions are not optimal. Empirical results show important differences between classical and Bayesian approaches for portfolio composition, expected return and measures of risk.


Issue Date:
1983-12
Publication Type:
Journal Article
PURL Identifier:
http://purl.umn.edu/32102
Published in:
Western Journal of Agricultural Economics, Volume 08, Number 2
Page range:
103-111
Total Pages:
9




 Record created 2017-04-01, last modified 2017-08-24

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