IDEAS home Printed from https://ideas.repec.org/a/sae/jocore/v36y1992i1p53-85.html
   My bibliography  Save this article

A Portfolio Diversification Model of Alliances

Author

Listed:
  • John A. C. Conybeare

    (University of Iowa)

Abstract

The theory of finance demonstrates that diversified investment portfolios produce superior combinations of risk and return, and that investors may choose a portfolio reflecting their preferred mix of risk and return. These techniques may be applied to military alliances. The rate of return and risk of an ally follows a positive linear relationship, as predicted by capital asset pricing theory. Random diversification of allies will, as with investment portfolios, reduce the country-unique components of alliance risk toward that which is inherent in the system as a whole. Some alliances will be more efficient at producing greater return and lower risk. The most efficient alliances will be those in which variations in ally effort move in opposite directions. Development of the demand side of portfolio analysis may predict which alliances are optimal, and therefore most likely to form. These principles are applied to the Triple Entente and Triple Alliance between 1879 and 1914. It is suggested that the Entente had superior efficiency characteristics and that ally choices were consistent with demand patterns.

Suggested Citation

  • John A. C. Conybeare, 1992. "A Portfolio Diversification Model of Alliances," Journal of Conflict Resolution, Peace Science Society (International), vol. 36(1), pages 53-85, March.
    • Handle: RePEc:sae:jocore:v:36:y:1992:i:1:p:53-85
    DOI: 10.1177/0022002792036001003
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/0022002792036001003
    Download Restriction: no
    File URL: https://libkey.io/10.1177/0022002792036001003?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. repec:cup:cbooks:9780521315937 is not listed on IDEAS
    2. de Mesquita, Bruce Bueno, 1985. "The War Trap Revisited: A Revised Expected Utility Model," American Political Science Review, Cambridge University Press, vol. 79(1), pages 156-177, March.
    3. Christensen, Thomas J. & Snyder, Jack, 1990. "Chain gangs and passed bucks: predicting alliance patterns in multipolarity," International Organization, Cambridge University Press, vol. 44(2), pages 137-168, April.
    4. Li, Richard P. Y. & Thompson, William R., 1978. "The Stochastic Process of Alliance Formation Behavior," American Political Science Review, Cambridge University Press, vol. 72(4), pages 1288-1303, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Courtois, Pierre & Figuieres, Charles & Mulier, Chloe & Weill, Joakim, 2018. "A Cost–Benefit Approach for Prioritizing Invasive Species," Ecological Economics, Elsevier, vol. 146(C), pages 607-620.
    2. Rizov, Marian, 2005. "Rural development under the European CAP: The role of diversity," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 42(4), pages 621-628.
    3. Keith Hartley & Todd Sandler, 2001. "Economics of Alliances: The Lessons for Collective Action," Journal of Economic Literature, American Economic Association, vol. 39(3), pages 869-896, September.
    4. Gregorius, Hans-Rolf & Gillet, Elizabeth M., 2008. "Generalized Simpson-diversity," Ecological Modelling, Elsevier, vol. 211(1), pages 90-96.
    5. Conrad, Jon M., 2018. "Real Options for Endangered Species," Ecological Economics, Elsevier, vol. 144(C), pages 59-64.
    6. repec:edn:sirdps:433 is not listed on IDEAS
    7. Sovacool, Benjamin K. & Mukherjee, Ishani, 2011. "Conceptualizing and measuring energy security: A synthesized approach," Energy, Elsevier, vol. 36(8), pages 5343-5355.
    8. Perry, Neil & Shankar, Sriram, 2017. "The State-contingent Approach to the Noah's Ark Problem," Ecological Economics, Elsevier, vol. 134(C), pages 65-72.
    9. Safarzynska, Karolina, 2017. "The Implications of Industrial Development for Diversification of Fuels," Ecological Economics, Elsevier, vol. 137(C), pages 37-46.
    10. Hein, Lars & Gatzweiler, Franz, 2006. "The economic value of coffee (Coffea arabica) genetic resources," Ecological Economics, Elsevier, vol. 60(1), pages 176-185, November.
    11. Gerber, Nicolas, 2011. "Biodiversity measures based on species-level dissimilarities: A methodology for assessment," Ecological Economics, Elsevier, vol. 70(12), pages 2275-2281.
    12. Gregorius, Hans-Rolf, 2012. "Assessing biological variation from the perspective of diversity," Ecological Modelling, Elsevier, vol. 224(1), pages 1-10.
    13. Pavoine, Sandrine & Bonsall, Michael B., 2009. "Biological diversity: Distinct distributions can lead to the maximization of Rao’s quadratic entropy," Theoretical Population Biology, Elsevier, vol. 75(2), pages 153-163.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gary Goertz & Tony Hak & Jan Dul, 2013. "Ceilings and Floors," Sociological Methods & Research, , vol. 42(1), pages 3-40, February.
    2. Patrick James, 1998. "Rational Choice? Crisis Bargaining Over the Meech Lake Accord," Conflict Management and Peace Science, Peace Science Society (International), vol. 16(2), pages 149-184, September.
    3. Luterbacher Urs, 2004. "Conflict and Irrevocable Decisions," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 10(3), pages 1-9, December.
    4. Ivan Savic & Zachary C. Shirkey, 2009. "Trust in the Balance," Journal of Theoretical Politics, , vol. 21(4), pages 483-507, October.
    5. Siddharth Swaminathan, 1999. "Time, Power, and Democratic Transitions," Journal of Conflict Resolution, Peace Science Society (International), vol. 43(2), pages 178-191, April.
    6. Paul D. Senese, 1997. "Costs and Demands," Journal of Conflict Resolution, Peace Science Society (International), vol. 41(3), pages 407-427, June.
    7. Brian Efird & Gaspare M. Genna, 2002. "Structural Conditions and the Propensity for Regional Integration," European Union Politics, , vol. 3(3), pages 267-295, September.
    8. Edward P. Lazear, 2000. "Economic Imperialism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(1), pages 99-146.
    9. Michael W. Simon & Erik Gartzke, 1996. "Political System Similarity And The Choice of Allies," Journal of Conflict Resolution, Peace Science Society (International), vol. 40(4), pages 617-635, December.
    10. Liam Campling & Elizabeth Havice, 2013. "Mainstreaming Environment and Development at the World Trade Organization? Fisheries Subsidies, the Politics of Rule-Making, and the Elusive ‘Triple Win’," Environment and Planning A, , vol. 45(4), pages 835-852, April.
    11. Kevin J. Sweeney, 2003. "The Severity of Interstate Disputes," Journal of Conflict Resolution, Peace Science Society (International), vol. 47(6), pages 728-750, December.
    12. Bruce Bueno de Mesquita, 1987. "Conceptualizing War," Journal of Conflict Resolution, Peace Science Society (International), vol. 31(2), pages 370-382, June.
    13. Stephen Biddle & Stephen Long, 2004. "Democracy and Military Effectiveness," Journal of Conflict Resolution, Peace Science Society (International), vol. 48(4), pages 525-546, August.
    14. Grace Iusi Scarborough, 1988. "Polarity, Power, and Risk in International Disputes," Journal of Conflict Resolution, Peace Science Society (International), vol. 32(3), pages 511-533, September.
    15. Paul A. Kowert & Margaret G. Hermann, 1997. "Who Takes Risks?," Journal of Conflict Resolution, Peace Science Society (International), vol. 41(5), pages 611-637, October.
    16. Mansour-Ichrakieh, Layal, 2020. "The impact of Israeli Geopolitical Risks on the Lebanese Financial Market: A Destabilizer Multiplier," MPRA Paper 99376, University Library of Munich, Germany.
    17. Timothy Mathews & Aniruddha Bagchi, 2019. "Conflict without an Apparent Cause," Games, MDPI, vol. 10(4), pages 1-12, October.
    18. Zeev Maoz, 2009. "The Effects of Strategic and Economic Interdependence on International Conflict Across Levels of Analysis," American Journal of Political Science, John Wiley & Sons, vol. 53(1), pages 223-240, January.
    19. Michael Nicholson, 1987. "The Conceptual Bases of The War Trap," Journal of Conflict Resolution, Peace Science Society (International), vol. 31(2), pages 346-369, June.
    20. Hemda Ben-Yehuda, 1999. "Opportunity Crises: Framework and Findings, 1918-1994," Conflict Management and Peace Science, Peace Science Society (International), vol. 17(1), pages 69-102, February.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:jocore:v:36:y:1992:i:1:p:53-85. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: http://pss.la.psu.edu/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.