Mean-variance analysis in temporary equilibrium
Mean-variance analysis in temporary equilibrium
In this paper we take the first few steps towards a new theory of portfolio choice in the spirit of conventional mean-variance analysis but without strong assumptions on preferences or the distributions for returns. In this model agents form beliefs about returns based on conjectures about finitely many moments. In temporary equilibrium all current markets clear and conjectures about moments are correct. We prove the existence of a steady-state sequence of temporary equilibria and identify conditions on the structure of beliefs that ensure that the steady-state temporary equilibrium beliefs are in some sense accurate and closely approximate rational expectations.
mean-variance analysis, temporary equilibrium
331-345
Raugh, Michael T.
f55d1932-2027-4935-a4c2-16a4ea70709b
Seccia, Giulio
5fb5c6bf-4289-4962-9682-d2decbb0c4ba
2001
Raugh, Michael T.
f55d1932-2027-4935-a4c2-16a4ea70709b
Seccia, Giulio
5fb5c6bf-4289-4962-9682-d2decbb0c4ba
Raugh, Michael T. and Seccia, Giulio
(2001)
Mean-variance analysis in temporary equilibrium.
Research in Economics, 55 (3), .
(doi:10.1006/reec.2000.0258).
Abstract
In this paper we take the first few steps towards a new theory of portfolio choice in the spirit of conventional mean-variance analysis but without strong assumptions on preferences or the distributions for returns. In this model agents form beliefs about returns based on conjectures about finitely many moments. In temporary equilibrium all current markets clear and conjectures about moments are correct. We prove the existence of a steady-state sequence of temporary equilibria and identify conditions on the structure of beliefs that ensure that the steady-state temporary equilibrium beliefs are in some sense accurate and closely approximate rational expectations.
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Published date: 2001
Keywords:
mean-variance analysis, temporary equilibrium
Identifiers
Local EPrints ID: 32906
URI: http://eprints.soton.ac.uk/id/eprint/32906
ISSN: 1090-9443
PURE UUID: 29b96829-8d77-458d-8e49-0563b0695535
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Date deposited: 15 May 2006
Last modified: 15 Mar 2024 07:40
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Author:
Michael T. Raugh
Author:
Giulio Seccia
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