A Note on the Derivation of Linear Homogeneous Asset Demand Functions / Benjamin M. Friedman, V. Vance Roley.

Format:

Book

Author/Creator:

Friedman, Benjamin M.

Contributor:

National Bureau of Economic Research.

Roley, V. Vance.

Series:

Working Paper Series (National Bureau of Economic Research) no. w0345.

NBER working paper series no. w0345

Language:

English

Subjects (All):

Economics.

Risk.

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1979.

Cambridge, Massachusetts : National Bureau of Economic Research, 1979.

Summary:

Among the numerous familiar sets of specific assumptions sufficient to derive mean-variance portfolio behavior from more general expected utility maximization in continuous time, the assumptions of constant relative risk aversion and joint normally distributed asset return assessments are also jointly sufficient to derive asset demand functions with the two desirable (and frequently simply assumed) properties of wealth homogeneity and linearity in expected returns. In addition, in discrete time constant relative risk aversion and joint normally distributed asset return assessments are sufficient to yield linear homogeneous asset demands as approximations if the time unit is small.

Notes:

Print version record

May 1979.