Effects of Uncertain and Nonstationary Parameters upon Capital Market Equilibrium Conditions

Christopher B. Barry

Journal of Financial and Quantitative Analysis, 1978, vol. 13, issue 3, 419-433

Abstract: Formal models for portfolio analysis, such as Markowitz [13], are frequently based upon mean-variance analyses and involve the estimation of a mean vector and a variance-covariance matrix describing expected returns and variability of returns for all securities under consideration. These parameter estimates play a major role in the selection of a single, optimal portfolio. Kalymon [9] and Barry [1] have considered the effects of parameter uncertainty upon individual investors' inferences and decisions in the context of portfolio selection, and Barry and Winkler [2] have similarly considered the impact of nonstationary means upon portfolio selection decisions by individual investors.

Date: 1978
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