PORTFOLIO ANALYSIS CONSIDERING ESTIMATION RISK AND IMPERFECT MARKETS

Bruce L. Dixon and Peter J. Barry

Western Journal of Agricultural Economics, 1983, vol. 08, issue 2, 9

Abstract: Mean-variance efficient portfolio analysis is applied to situations where not all assets are perfectly price elastic in demand nor are asset moments known with certainty. Estimation and solution of such a model are based on an agricultural banking example. The distinction and advantages of a Bayesian formulation over a classical statistical approach are considered. For maximizing expected utility subject to a linear demand curve, a negative exponential utility function gives a mathematical programming problem with a quartic term. Thus, standard quadratic programming solutions are not optimal. Empirical results show important differences between classical and Bayesian approaches for portfolio composition, expected return and measures of risk.

Keywords: Agricultural Finance; Research Methods/Statistical Methods (search for similar items in EconPapers)
Date: 1983
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:wjagec:32102

DOI: 10.22004/ag.econ.32102

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