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Multidimensional Security Pricing

Published online by Cambridge University Press:  19 October 2009

Extract

Portfolio analysis has generally been restricted to problems in, at most, two dimensions, expected return and risk, the latter usually measured by standard deviation. In two papers Jean [2, 4] has attempted to extend the analysis to three and many dimensions by deriving risk premiums as functions of higher order moments. This paper corrects several errors in his work and derives a normative, individual pricing model for risky securities analogous to the capital market line within the framework of a perfect market.

Type
Research Article
Copyright
Copyright © School of Business Administration, University of Washington 1975

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References

REFERENCES

[1]Arditti, Fred and Levy, Haim. “Distribution Moments and Equilibrium: A Comment.Journal of Financial and Quantitative Analysis (January 1972).CrossRefGoogle Scholar
[2]Jean, William H.The Extension of Portfolio Analysis to Three or More Parameters.Journal of Financial and Quantitative Analysis (January 1971)CrossRefGoogle Scholar
[3]Jean, William H.Distribution Moments and Equilibrium: A Reply.Journal of Financial and Quantitative Analysis (January 1972).CrossRefGoogle Scholar
[4]Jean, William H.More on Multidimensional Portfolio. Analysis.Journal of Financial and Quantitative Analysis (June 1973).CrossRefGoogle Scholar
[5]Merton, Robert C.An Analytical Derivation of the Efficient Portfolio Frontier.Journal of Financial and Quantitative Analysis (September 1972)CrossRefGoogle Scholar
[6]Pratt, J.Risk Adversion in the Small and the Large.Econometrica (January–April 1964).CrossRefGoogle Scholar