The Fundamental Theorem of Parameter-Preference Security Valuation

Mark E. Rubinstein

Journal of Financial and Quantitative Analysis, 1973, vol. 8, issue 1, 61-69

Abstract: Under the assumption that individuals are single-period maximizers of the expected utility of their future wealth, this essay extends the mean-variance security valuation model developed by Sharpe [10], Lintner [4, 5, and 6], and Mossin [7 and 8] to a general parameter-preference model, with and without the simplifications of homogeneous subjective probabilities and the existence of a risk-free security. Results with quadratic and cubic utility are developed as special cases.

Date: 1973
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