On the Independence of Irrelevant Assets: McEntire's Conjecture

Raj Deb, Josef Hadar and Tae Kun Seo
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Raj Deb: Department of Economics, Southern Methodist University, Dallas, TX 75275
Josef Hadar: Department of Economics, Southern Methodist University, Dallas, TX 75275
Tae Kun Seo: Department of Economics, Southern Methodist University, Dallas, TX 75275

Management Science, 1991, vol. 37, issue 3, 301-306

Abstract: In his 1984 paper in Management Science, McEntire conjectured that all concave utility functions satisfy his independence-from-irrelevant-assets (IIA) property. This paper shows that this conjecture is false. The paper provides several families of utility functions, all of whose members violate the IIA property; moreover, it is shown that the set of utility functions violating the IIA property is quite large, and that it is widespread throughout the entire space of utility functions.

Keywords: portfolio selection; irrelevant assets (search for similar items in EconPapers)
Date: 1991
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:37:y:1991:i:3:p:301-306

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