Stochastic Dominance With a Riskless Asset: An Imperfect Market

Yoram Kroll and Haim Levy

Journal of Financial and Quantitative Analysis, 1979, vol. 14, issue 2, 179-204

Abstract: The assumption that investors can borrow and lend at a riskless interest rate reduces the Mean-Variance (M-V) efficient set to only one optimal unlevered portfolio. However, once we realize that the market is generally imperfect and that the borrowing rate is higher than the lending rate, we can no longer use the mean-variance Separation Theorem. Instead, a number of unlevered portfolios must be included in the efficient set, while the optimal unlevered portfolio is selected on the basis of the investor's preference. The size of the efficient set of unlevered portfolios is a function of the type of empirical data used and of the disparity between the borrowing and lending interest rates.

Date: 1979
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.cambridge.org/core/product/identifier/ ... type/journal_article link to article abstract page (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cup:jfinqa:v:14:y:1979:i:02:p:179-204_00

Access Statistics for this article

More articles in Journal of Financial and Quantitative Analysis from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK.
Bibliographic data for series maintained by Kirk Stebbing ().