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Risk, Ruin and Investment Analysis

Published online by Cambridge University Press:  19 October 2009

Robert E. Machol  and
Eugene M. Lerner
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Extract

In this article, we shall discuss several of the alternative definitions of risk that have been proposed from time to time. We shall show that one definition — risk is the probability of loss — leads to a formulation of the investment decision problem as a chance constrained problem. Three different strategies are then proposed by which an investor can reduce risk. It is our belief that professional investors utilize all three strategies and that risk, in many such cases, is not a substantial constraint on investor behavior.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 4 , Issue 4 , December 1969 , pp. 473 - 492
Copyright
Copyright © School of Business Administration, University of Washington 1969

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