Demonstration of the Use of Lower Partial Moments to Improve Safety-First Probability Limits

Joseph Atwood

American Journal of Agricultural Economics, 1985, vol. 67, issue 4, 787-793

Abstract: A general stochastic inequality is presented which utilizes lower partial moments to generate sharp upper bounds on safety-first type probabilities. Alternative forms of the inequality often generate less conservative probability bounds than Chebychev's mean-standard error and Berck and Hihn's mean-semivariance inequalities. Of particular interest is the linear lower partial moment version which utilizes absolute deviations below a fixed reference point. A constraint is developed which, if enforced in an optimization model, guarantees that safety-first probability concerns are satisfied while selecting the least constraining level for the reference point.

Date: 1985
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Persistent link: https://EconPapers.repec.org/RePEc:oup:ajagec:v:67:y:1985:i:4:p:787-793.

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