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Portfolio Response to a Shift in a Return Distribution: Comment

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  • Dachraoui, K.
  • Dionne, G.

Abstract

In this paper we show how a shift in a return distribution affects the composition of an optimal portfolio in the case of one riskless asset and two risky assets. We obtain that, in general, such a shift modifies the composition of themutual fund. We also show that the separating conditions presented in the finance literature for the setting of the optimal portfolios, are not robust to the comparative statics following distributional shifts if we want to obtain intuitive results.

Suggested Citation

  • Dachraoui, K. & Dionne, G., 1998. "Portfolio Response to a Shift in a Return Distribution: Comment," Papers 9821, Paris X - Nanterre, U.F.R. de Sc. Ec. Gest. Maths Infor..
    • Handle: RePEc:fth:pnegmi:9821
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    References listed on IDEAS

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    1. Meyer, Jack & Ormiston, Michael B, 1994. "The Effect on Optimal Portfolios of Changing the Return to a Risky Asset: The Case of Dependent Risky Returns," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(3), pages 603-612, August.
    2. Eeckhoudt, Louis & Gollier, Christian, 1995. "Demand for Risky Assets and the Monotone Probability Ratio Order," Journal of Risk and Uncertainty, Springer, vol. 11(2), pages 113-122, September.
    3. Dionne, Georges & Gollier, Christian, 1996. "A Model of Comparative Statics for Changes in Stochastic Returns with Dependent Risky Assets," Journal of Risk and Uncertainty, Springer, vol. 13(2), pages 147-162, September.
    4. Rothschild, Michael & Stiglitz, Joseph E., 1971. "Increasing risk II: Its economic consequences," Journal of Economic Theory, Elsevier, vol. 3(1), pages 66-84, March.
    5. Cass, David & Stiglitz, Joseph E., 1970. "The structure of investor preferences and asset returns, and separability in portfolio allocation: A contribution to the pure theory of mutual funds," Journal of Economic Theory, Elsevier, vol. 2(2), pages 122-160, June.
    6. Mitchell, Douglas W & Douglas, Stratford M, 1997. "Portfolio Response to a Shift in a Return Distribution: The Case of n-Dependent Assets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(4), pages 945-950, November.
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    More about this item

    Keywords

    FINANCIAL ASSETS ; INFORMATION ; RISK;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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