An Integrated Risk Measure with Application to UK Asset Allocation

C. Damant, Soosung Hwang () and S. E. Satchell

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: In this paper the integrated risk measure of Damant and Satchell (1996) is used to formulate an investor's utility function and the properties of this function are investigated. The authors calibrate their utility function for a typical UK investor who would hold different proportions of equity. They find that, for plausible parameter values, a typical UK investor will hold more equity under the assumption of non-normality of return if h is utility function has the above formulation and not the standard mean-variance utility function. Furthermore, their utility function is consistent with positive skewness affection and kurtosis aversion. Some aggregate estimates of risk parameters are calculated for the typical UK investor. These do not seem well-determined, raising issues of the roles of aggregation and wealth in this model.

Date: 1997-07
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Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:9714

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