On the Use of a Covariance Function in a Portfolio Model

In the analysis of problems of choice under uncertainty, many results depend on the investigator's ability to determine the signs of certain integrals. A recently derived method of doing this—christened the “covariance method” by Batra [2]—demonstrates that, in certain cases, recognition of the...

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Bibliographic Details
Published in:Journal of financial and quantitative analysis 1983-06, Vol.18 (2), p.223-227
Main Author: Dalal, Ardeshir J.
Format: Article
Language:English
Subjects:
Coefficients
Covariance
Critical values
Economic uncertainty
Financial portfolios
Mathematical models
Portfolio investments
Risk aversion
Statistical analysis
Statistical methods
Uncertainty
Utility functions
Variances
Wealth
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Summary:In the analysis of problems of choice under uncertainty, many results depend on the investigator's ability to determine the signs of certain integrals. A recently derived method of doing this—christened the “covariance method” by Batra [2]—demonstrates that, in certain cases, recognition of the fact that the integrals involved are composed of covariance terms can provide a simple and elegant solution to the problem. This paper uses a simple portfolio model to demonstrate that these covariance terms can be exploited to obtain other useful results as well.
ISSN:0022-1090
1756-6916
DOI:10.2307/2330920