Empirically testing for the location–scale condition: a review of the economic literature

An interesting strand of the applied economic literature considers the conditions that are required for two major theories of economic decisions under uncertainty, mean-variance and expected utility to be consistent with each other. One of these conditions is the location-scale (LS) parameter condit...

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Bibliographic Details
Published in:Journal of risk model validation 2012-10, Vol.6 (3), p.51-66
Main Authors: Vassalos, Michael, Dillon, Carl R, Childs, Paul D
Format: Article
Language:English
Subjects:
Agricultural economics
Decision making
Economic theory
Economics
Expected utility
expected utility theory
Kurtosis
Normal distribution
Portfolios
Random variables
Rates of return
Reviews
Risk factors
Skewness
Studies
Variance analysis
Citations: Items that cite this one
Online Access:Get full text
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Summary:An interesting strand of the applied economic literature considers the conditions that are required for two major theories of economic decisions under uncertainty, mean-variance and expected utility to be consistent with each other. One of these conditions is the location-scale (LS) parameter condition. If the LS condition can be verified there is a clear sense in which a mean-variance approach, which assumes a portfolio variance as the risk measure, will be validated. [PUBLICATION ABSTRACT]
ISSN:1753-9579
1753-9579
DOI:10.21314/JRMV.2012.092