Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/147736
Authors: 
Azar, Samih Antoine
Karaguezian-Haddad, Vera
Year of Publication: 
2014
Citation: 
[Journal:] Cogent Economics & Finance [ISSN:] 2332-2039 [Volume:] 2 [Year:] 2014 [Issue:] 1 [Pages:] 1-7
Abstract: 
In this paper, expected utility, defined by a Taylor series expansion around expected wealth, is maximized. The coefficient of relative risk aversion (CRRA) that is commensurate with a 100% investment in the risky asset is simulated. The following parameters are varied: the riskless return, the market standard deviation, the market stock premium, and the skewness and the kurtosis of the risky return. Both the high extremes and the low extremes are considered. With these figures, the upper bound of the market CRRA is 3.021 and the lower bound is 0.466. Log utility, which corresponds to a CRRA of 1, is not excluded.
Subjects: 
relative risk aversion
expected utility maximization
Taylor series expansion
100% investment in the risky asset
normal distribution
skewness
kurtosis
simulation
JEL: 
D81
G11
C15
Persistent Identifier of the first edition: 
Creative Commons License: 
http://creativecommons.org/licenses/by/3.0/
Document Type: 
Article

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