Distributional Analysis of Portfolio Choice

Philip Dybvig

No 827R, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We compare trading in a market with receiving some particular consumption bundle, given increasing state-independent preferences and complete markets. The analysis focuses on the distributional price of the particular bundle. The distributional price is the price of the cheapest utility-equivalent bundle sold in the market. The distributional price is determined by the distributional functions of the outside bundle and the state price density. Simple portfolio performance measures illustrate the value of the approach. Unlike CAPM-based measures, these measures are valid even when superior information is the source of superior performance.

Pages: 41 pages
Date: 1987, Revised 1988-01
Note: CFP 709.
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Citations: View citations in EconPapers (86)

Published in Journal of Business (1988), 61(3): 369-393

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