does there exist a relation between inflation and relative price change variability the effect of the aggregation level abstract the actual magnitude of relative price change variability is dependent on the level of aggregation this note demonstrates the effect of this dependence when we try to estimate a relation between inflation and relative price change variability and when we perform a decomposition analysis of this variability

recent changes in the social rented sector in the netherlands the netherlands has a large and differentiated stock of social rented dwellings forming more than 40 per cent of the total housing stock housing associations are by far the largest providers of housing services in this sector traditionally these associations were subsidised heavily but since 1995 dutch government has no longer directly subsidised these associations this paper deals with changes in dutch housing associations in a period 1988 95 characterised by government austerity deregulation market conformity privatisation and promotion of home ownership it is explained how the housing associations were able to survive and even maintain prospects for a promising future in a political climate that threatened the social rented sector it is clear that housing associations can now operate more independently than in the past this is seen as a positive development but the government is now discovering the drawbacks of complete privatisation a firmer embedding in a public framework is considered

further evidence on the variability of inflation and relative price variability abstract using a sample of monthly observations of both a 12 category group and a 203 category group of personal consumption expenditures we furnish evidence that relative price variability is positively related to both the inflation rate and inflation variability the relation is robust to oil price shocks

money and the dispersion of relative prices a price dispersion equation is tested with data from the german hyperinflation the equation is derived from a version of lucas s and barro s partial information localized market models in this extension different excess demand elasticities across commodities imply a testable dispersion equation in which the explanatory variable is the magnitude of the unperceived money growth in order to test this hypothesis a price dispersion series is constructed and a measure of the unperceived part of money growth is estimated the model receives support from the empirical analysis although it is evident that unincluded variables have important effects on price dispersion

skewness preference risk aversion and the precedence relations on stochastic changes this paper provides a general choice theoretic characterization of the trade off between risk and skewness whose importance in understanding risk taking behavior is well documented in empirical studies the condition under which the prudence measure kimball 1990 characterizes the strength of an individual s downside risk aversion against his own risk aversion is identified and interpreted in a unifying framework based on the concept of one stochastic dominant change preceding another and that of the desirability of a stochastic change the framework is also shown to be useful for a better understanding of the arrow pratt measure the stronger ross measure and the coincidence of the characterizations of downside risk aversion and prudence as well as the relationship between stochastic dominances of different degrees

properties of the social discount rate in a benthamite framework with heterogeneous degrees of impatience this paper derives the properties of the discount rate that should be applied to a public sector project when the affected population has heterogeneous degrees of impatience we show that for any distribution of discount rates the social discount rate has the following properties it decreases over time it is lower than the average of the discount rates in the population and it converges to the discount rate of the most patient individual in the economy these properties hold for both constant and decreasing individual discount rates finally we evaluate how changes in the distribution of individual discount rates affect the social discount rate

relative price variability inflation and the allocative efficiency of the price system abstract this paper develops a theory of the relationship between aggregate and relative price variability based on the inability of people even in a rational world to identify permanent changes in relative demands whether caused by real or by monetary variability and relative productivities as soon as they occur the theory implies that the variance of the rate of inflation and the variance of relative price change are positively related although expectations are rational and markets always clear production decisions respond sluggishly to changes in relative prices temporary shocks to relative demands cause prolonged changes in the structure of production available information is used so as to maximize the efficiency of the price system however this efficiency decreases when any of the underlying variances increases this decrease is more pronounced when the production lag is longer

the relationship between relative prices and the general price level it is very nearly a truismi amaong neoclassical economists that the public is wont to confuse changes in the general price level with relative price changes correspondingl y one might speak of the independence between the two as one of the central postulates of the neoclassical tradition william stanley jevons was aml ong the first to identify this basic dichotomin economic life as well as to attempt to explain the ordinary citizen s seenming incapacity to understand it

the effects of shifts in a return distribution on optimal portfolios when the distribution of the returns of a risky asset undergoes a stochastically dominating shift a risk averse investor may not necessarily increase the investment in that asset this paper provides restrictions on the investor s utility function that are necessary and sufficient for a dominating shift to bring about no decrease in the investment in the respective asset if there are two risky assets in the portfolio these conditions are also necessary if there are n 2 assets and are necessary and sufficient if the utility function exhibits constant absolute risk aversion copyright 1990 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

testing for the monotone likelihood ratio assumption although monotonicity of the likelihood ratio for conditioned densities is a common technical assumption in economic models empirical tests for its plausibility do not appear to have been conducted this article develops such a test based on the theory of order restricted inference that is robust with respect to the correlation structure of the distributions being compared the test is applied to study the technology revealed by agricultural production experiments for the data under scrutiny the results support the monotone likelihood ratio assumption in a second application we find some support for the assumption of affiliation among bids cast in a multiple round vickrey auction for a consumption good

the ross characterization of risk aversion strengthening and extension this paper offers an interpretive comparison of the arrow pratt and ross characterizations of comparative risk aversion for expected utility maximizers the tools used in this comparison are then applied to obtain a strengthening of the ross cha racterization this strengthened result is in turn extended to the ca se of general smooth nonexpected utility preferences over probabili ty distributions copyright 1987 by the econometric society

assortative matching and risk sharing abstract this paper explores the sorting patterns in a two sided matching market where agents facing different risks match to share them when preference belongs to the class of harmonic absolute risk aversion hara the risk premium is perfectly transferable within each partnership thus a stable match minimizes the social cost of risk in the systematic risk model where agents are ranked by their holdings of a common risky asset the convexity of the joint risk premium in joint risk size leads to negative assortative matching nam in the idiosyncratic risk model where agents are ranked by their independent riskiness in the sense of second order stochastic dominance ssd nam arises when preference exhibits decreasing absolute risk aversion dara in the sense of ross and riskier background risk leads to more risk averse behavior however nam may fail to arise when riskier background risk leads to more risk tolerant behavior

on existence and uniqueness of equilibrium in a class of noisy rational expectations models i study a general class of noisy rational expectations models that nests the standard grossman and stiglitz 1980 and hellwig 1980 models but relaxes the usual assumption of joint normality of asset pay offs and supply and allows for more general signal structures i provide a constructive proof of existence of equilibrium characterize the price function and provide sufficient conditions for uniqueness within the class of equilibria with continuous price functions which are met by both the grossman and stiglitz 1980 models and the hellwig 1980 models with a continuum of investors my solution approach does not rely on the typical conjecture and verify method and i exhibit a number of non normal examples in which asset prices can be characterized explicitly and in a closed form the results presented here open up a broad class of models for applied work to illustrate the usefulness of generalizing the standard model i show that in settings with non normally distributed pay offs shocks to fundamentals may be amplified purely due to learning effects price drifts can arise naturally and the disagreement return relation depends in a novel way on return skewness

seasonal fluctuations in industrial production and stock market seasonals february and august peaks in the growth rates of the seasonally unadjusted industrial production index follow the stock market peaks documented by rozeff and kinney 1976 by one month coefficients on one month lead growth rates in industrial production for small firms are positive and significant in time series regressions even in the presence of the market factor moreover whereas returns on large firms stocks unidirectionally gran ger cause i e predict future growth rates in industrial production at least six months in advance returns on small firms stocks reflect one month lead as well as past growth rates in industrial production for these reasons we argue that seasonal real growth provides a partial explanation for the january stock seasonal among small firms

modeling international investment decisions for financial holding companies abstract this research analyzes the internationalization process model developed by johanson and vahlne and derives two integer programming investment decision models that consider the risk attitudes of investment firms johanson and vahlne s model provides a starting point for building a model that suits the investment approach and decision making process of financial holding companies in practice when firms make an international investment decision there is a need for a model that can generate outputs based on financial measures such as profit investment returns and tolerable levels of risk thus in this paper johanson and vahlne s concepts are studied and financial managers are interviewed to derive models that match the investment decision procedures of the firms the model helps firms manage the risks of their investments and derive accurate investment strategies based on investment objectives and constraints

on abel s concept of doubt and pessimism abstract in this paper we characterize subjective probability beliefs leading to a higher equilibrium market price of risk we establish that abel s result on the impact of doubt on the risk premium is not correct in general see abel 2002 an exploration of the effects of pessimism and doubt on asset returns journal of economic dynamics and control 26 1075 1092 we introduce on the set of subjective probability beliefs market price of risk dominance concepts and we relate them to well known dominance concepts used for comparative statics in portfolio choice analysis in particular the necessary first order conditions on subjective probability beliefs in order to increase the market price of risk for all nondecreasing utility functions appear as equivalent to the monotone likelihood ratio property

a note on the variability of inflation and the dispersion of relative price changes abstract the relationship between the variance of inflation and the variability of relative price changes is analyzed empirically a strong positive association is found for 1948 1969 and 1948 1975 application of chow s test indicates structural instability and granger s test suggests a feedback effect between these variables

financial and social returns in housing asset management theory and dutch housing associations practice this paper discusses how financial and social returns can be measured in relation to asset management in dutch housing associations the potential applications of performance measurement in housing asset management are assessed as well as the indicators that can be used to measure financial and social returns an explorative survey among dutch housing associations indicates that practice is poorly developed as far as the measurement of financial return is concerned a few associations operate in accordance with the theoretical ideal however many of them still follow a traditional book keeping approach which is unsuitable for supporting asset management decisions as far as social return is concerned the survey indicates that although associations collect a lot of data they do not really evaluate their performance by comparing their output against pre set targets or benchmarks the poorly developed evaluation of performance makes it difficult for housing associations to achieve the various objecti

variability of price changes in oecd member countries abstract this paper considers differences in price changes for 12 countries within the decades 1960 1970 and 1970 1980 it shows that the higher inflation rates of the 1970s were not necessarily accompanied by larger relative price changes but almost invariably by larger year to year fluctuations

regulatory and organisational responses to restructured housing association finance in england and wales risk was shifted from government to housing associations during the late 1980s producing a very different operating environment for associations based around competition critical in this has been an increased emphasis on financial management the paper explores the impacts of these changes through an examination of the welsh regulator s housing for wales responses and through changing management and organisation within associations the policy responses by housing for wales indicate an increasing emphasis on social policy regulatory objectives though within a very interventionist framework which works to limit the ability of associations financially to plan their future innovations in housing associations are also examined to highlight organisational responses to the new environment these innovations have focused on the often uncritical importation of private sector management practices including telephone based housing management services demonstration projects and moves towards core periphery

robustness of the relationship between price variability and inflation for us manufacturing we study the relationship between relative price variability and inflation in two different ways we first look at product class census unit values for five time periods between 1958 and 1982 and find evidence of a positive relationship between variability and inflation then we directly update the vining and elwertowski 1976 study for the period 1974 91 using individual commodity series from the bureau of labor statistics we conclude by discussing differences across industries in price stickiness

ceo optimism and forced turnover abstract we show theoretically that optimism can lead a risk averse chief executive officer ceo to choose the first best investment level that maximizes shareholder value optimism below above the interior optimum leads the ceo to underinvest overinvest hence if boards of directors act in the interests of shareholders ceos with relatively low or high optimism face a higher probability of forced turnover than moderately optimistic ceos face using a large sample of turnovers we find strong empirical support for this prediction the results are consistent with the view that there is an interior optimum level of managerial optimism that maximizes firm value

portfolio choice under noisy asset returns abstract the lack of a clear effect of increases in risk upon the demand for risky assets has led to many restrictions on the types of risk increases and or on consumer preferences in order to obtain unambiguous comparative statics this paper examines the particularly simple yet overlooked case of white noise added to the return distribution it is shown that kimball s standard risk aversion is sufficient for noise to lead to reduced demand for risky assets

inflation and the distribution of price changes across markets a causal analysis recent advances in time series methodology are applied to the investigation of causal relationships between monthly changes in the consumer price index and changes in its dispersion across different consumption categories this dispersion is associated with the degree to which relative prices are changing past inflation rates seem useful in forecasting changes in relative prices but not vice versa there is also a significant contemporaneous correlation between these series hence it is concluded that fluctuations in the inflation rate help cause fluctuations in relative prices but not vice versa unless the entire effect occurs within a month the analysis also serves to illustrate a new way to implement the granger causality concept

strategic asset management in the social rented sector approaches of dutch and english housing associations in england and the netherlands in response to changes in housing policy and the market there is widespread enthusiasm for asset management in the social rented sector a key issue in both countries is the development of a strategic approach towards the formulation of asset management plans the paper examines this issue in relation to the current practice of housing associations in both countries drawing on case studies in england and the netherlands it is concluded that in both countries practice varies widely between housing associations some of the approaches adopted by front runners can be seen as models for other associations yet to develop a strategic approach towards asset management lessons can also be learnt across national boundaries though necessarily mediated by differences between the two housing systems

inflation and relative prices a decomposition analysis abstract the variability of relative prices is decomposed into a component due to real effects technical change real income growth and so on and a component due to inflation using quarterly australian data inflation is shown to account for 24 percent of the total relative price variability

inflation variability and relative price change variability in the netherlands 1951 1981 abstract experience with dutch data suggests that the acceptance or rejection of a relationship between inflation variability and relative price change dispersion strongly depends on the statistical specification of the former concept using a new specification for the netherlands a strong positive relationship is found the evidence concerning the direction of causality is inconclusive

the short run shutdown decision when output price and initial wealth are random abstract this paper extends the research of hori 1983 and chavas 1985 by investigating the short run shutdown decision of the competitive firm under output price risk when initial wealth is random central to this endeavor are the results of doherty and schlesinger 1986 and doherty et al 1987 concerning global and local risk premia under multiple sources of risk using a local risk premium two novel and intuitively pleasing results are reported here the reservation price of the shutdown decision varies a according to the diversification of the decision maker s cash flows and b if the decision maker exhibits dara then according to the depth of decision maker s pockets

variability of inflation and the dispersion of relative prices evidence from the chinese hyperinflation of 1946 1949 abstract this paper uses data from the chinese hyperinflation of 1946 1949 to focus on the relationship between the variability in the general price level and the dispersion in relative prices the issue is important because it bears on the natural rate hypothesis which supports the postulate that these two monetary variables are independent our results reinforce the bulk of previous evidence which suggests a positive correlation between the variation in inflation rate and the dispersion in relative prices during inflationary episodes

stochastic dominance and expected utility survey and analysis while stochastic dominance has been employed in various forms as early as 1932 it has only been since 1969 1970 that the notion has been developed and extensively employed in the area of economics finance agriculture statistics marketing and operations research in this survey the first second and third order stochastic dominance rules are discussed with an emphasis on the development in the area since the 1980s

a note on asset proportions stochastic dominance and the 50 rule in this note we analyze the composition of an optimal portfolio by considering the cumulative conditional expected outcome of two dependent assets we develop a conditional stochastic dominance relation and show that for any concave von neumann morgenstern utility function the proportion of wealth invested in the dominant asset will be greater than 50

inflation and relative price variability in yugoslavia abstract granger causality tests show that inflation granger causes relative price variability but the feedback relationship cannot be excluded

risk aversion and the propensities for self insurance and self protection for a risk averse individual the methods for reducing the expected financial impact of a loss include reducing the severity of any loss that occurs self insurance and reducing the probability of the occurrence of a loss self protection the literature on this topic has pointed to several anomalies whereby the use of self protection and self insurance yield quite unsimilar results for example ehrlich and becker 5 show that self insurance is always a substitute for market insurance an insurance company s indemnifying a loss whereas self protection and market insurance might be complements dionne and eeckhoudt 4 show that a more risk averse consumer would always invest more in self insurance activities but not necessarily more in self protection activities they argue 4 42 that this result is counterintuitive and provides an exception to the widely accepted result that increased risk aversion reduces risky activities ehrlich and becker 5 639 argue that the incentive to self protect is not so dependent on attitude towards risk both of the above papers seem to take for granted that self protection activities reduce the riskiness of the final wealth distribution however as we argue below this is not the case if riskiness is defined as in rothschild and stiglitz 14 even if we use the variance as our risk measure we do not always reduce risk via self protection dionne and eeckhoudt suggest that these results might not be robust enough to extend to models that incorporate random initial wealth risk and state dependent preferences we show that the model seems to be very robust we also explain why self protection is not at all an exception to the long standing result of arrow 1 whereby more risk averse individuals undertake a lower

inflation and relative price variability effect of temporal aggregation abstract the effect of temporal aggregation on the relation between inflation and variability of relative price changes in the united states is studied by using monthly consumer price index cpi data as well as quarterly observations derived by averaging the monthly series estimates from monthly and quarterly data show major differences for the periods 1973 1986 and 1980 1986

health and portfolio choices a diffidence approach the effect of health status on portfolio decisions has been extensively studied from an empirical viewpoint in this paper we propose a theoretical model of individuals choice of financial assets under bivariate utility functions depending on wealth and health our approach makes an extensive use of the diffidence theorem we establish the conditions under which the share of wealth held in risky assets falls as 1 individuals health status deteriorates and 2 individuals health status becomes risky these conditions are shown to be related to the behavior of the intensities of correlation aversion and of cross prudence as wealth increases

relation between inflation and relative price variability in the united states evidence from data for the 1980s abstract monthly cpi data for 1967 1986 in respect of 10 major categories are utilized the most significant result is a strongly negative association between relative price variability and inflation as well as its expected and unexpected components during the 1980s variations in the estimated coefficients for the three subperiods studied also seem interesting

inflation and relative prices a system wide approach abstract the paper introduces a system wide model for the analysis of the effects of inflation on relative prices this enables the identification of those commodities whose relative prices are distorted by inflation the model provides measures of the natural rate of relative price variability which is associated with zero inflation and the inflation rate which minimizes relative price variability an illustrative application with australian data is provided

mean variance preferences and investor behaviour we study the comparative statics implications of mean variance preferences for optimal portfolios specifically we show that all risk averse mean variance investors raise their investment in a risky asset in response to a change in that asset s return distribution if and only if the change lowers both the mean and standard deviation of the return by the same percentage besides being of interest in its own right our results allow us to compare some comparative statics implications and the expected utility and mean variance models systematically

demand for risky financial assets a portfolio analysis abstract demand for risky financial assets takes place in portfolio settings the common stochastic orders applied in economics fail to rank demand for assets in such situations even for risk averse investors therefore the evaluation of the relative desirability of risky financial assets requires the establishment of new orders we prove that if returns on risky assets are ordered by the monotone likelihood ratio order then dominating assets will be more desired by all investors with nondecreasing utility functions

a note on the variability of inflation and the cross sectional dispersion of stock returns abstract this paper documents a positive relationship between the variance of the inflation rate and the variance of cross sectional common stock returns which is consistent with the imperfect information hypothesis we also report that the relationship has changed over time

inflation and relative price variability in the open economy this paper explores the determination of relative price variability in a small open economy operating under a fixed exchange rate a central ingredient of the model presented is the distinction made between traded and non traded goods this distinction leads to a decomposition of total variability into three components the variabilities within each set of goods and between the two sets the analysis also emphasizes the effects of expected versus unexpected inflation on the variability of relative prices the model is tested using annual data for mexico covering the 1951 76 period

some stronger measures of risk aversion in the small and the large with applications the arrow pratt measures of risk aversion for von neumann morgenstern utility functions have become workhorses for analyzing problems in the microeconomics of uncertainty they have been used to characterize the qualitative properties of demand in insurance and asset markets to examine the properties of risk taking in taxation models and to study the interaction between risk and life cycle savings problems to name just a few applications equally importantly they have generated the linear risk tolerance class of utility functions which has provided canonical examples in such diverse areas as portfolio theory and the theory of teams despite these successes there have been a number of areas for which the results have been weaker than hoped it is natural to use the risk aversion measures to compare the behavior of individuals in risky choice situations for example consider the individual portfolio choice problem in a two asset world with a riskless asset and a risky asset if individual a has a uniformly higher arrow pratt coefficient of risk aversion than individual b then b will always choose a portfolio combination with more wealth invested in the risky asset but suppose that both assets are risky now there is no obvious sense in which the more risk averse individual can be said to hold a less risky portfolio but it seems strange that such a simple alteration should destroy the analytics which support the basic intuition similarly consider the basic insurance problem if one individual a is more risk averse than another b in the arrow pratt sense it follows that a will pay a larger premium to insure against a random loss than will b typically though an individual evaluates partial rather than total insurance that is only some gambles can be insured against and others must be retained in this case even when the gambles which are retained are independent from those which are insured it is no longer true that the individual whose arrow pratt measure of risk aversion is higher will pay a larger insurance premium the situation is no better when we consider comparative statics exercises for a single individual decreasing absolute risk aversion in the sense of arrow and

intercountry differences in the relationship between relative price variability and average prices this paper provides new evidence on the relationship between relative price variability and inflation the model uses a consistently defined data set for nine european countries it benefits from the inclusion and testing of the effects of macroeconomic variables and the incorporation into the measures of inflation and dispersion adjustments for timeliness appropriate formulas and proximity the general findings of an effect on relative price variability by the macroeconomic environment and negative coefficients on unexpected inflation are supported by their occurrence in models estimated by seemingly unrelated regression and a robust systems estimator

on the theory of the competitive firm under uncertainty when initial wealth is random since sandmo s seminal paper on the theory of the competitive firm under output price uncertainty there has been considerable research on this topic 2 5 6 10 11 14 in all these studies it is assumed that in the absence of complete contingent markets output price risk is the only source of uncertainty for the firm however this may not be a realistic assumption in particular as argued by kihlstrom et al 7 it appears reasonable to consider the case where some of the initial wealth of the firm is held in risky assets in that case initial wealth is uncertain and should be modelled as a random variable the objective of this paper is to investigate the introduction of random initial wealth in sandmo s theory of the firm under price uncertainty in sandmo s model a number of important comparative static results e g the conditions under which the supply function is upward sloping 14 69 or under which increased price uncertainty reduces supply 5 depends critically on the sign of a particular expression stated in lemma 2 in ishii 5 while sandmo 14 69 shows this expression is non negative under arrow pratt decreasing absolute risk aversion it can be verified that his proof no longer holds when initial wealth is random therefore the comparative static analysis conducted by sandmo 14 batra and ullah 2 and ishii 5 is no longer valid and gives ambiguous results under initial wealth uncertainty the reason is that the arrow pratt measures of risk aversion 1 12 are too weak for making comparisons in situations where there is more than one source of uncertainty 13 then what can be deduced from the theory of the competitive firm in the realistic case where both initial wealth and output price are uncertain we will show here that meaningful results on the behavior of the competitiv firm under uncertainty can be obtained provided that the arrow pratt measures of risk aversion 1 12 are replaced by the ross measures of risk aversion 13 in particular a comparative static analysis of the production decisions using ross characterization of risk behavior is presented a number of new results are derived on the properties of risk responsive supply and input demand functions under both price and initial wealth uncertainty

inflation and relative price variability the effect of commodity aggregation using quarterly us data for 1948 89 we study the effect of the level of commodity aggregation on the relation between inflation and relative price variability the effect is assessed for the full period and the subperiods 1948 73 and 1974 89 the relationship is investigated for actual inflation as well as its expected and unexpected components although the parameter estimates show sizeable differences across the two aggregation levels the qualitative picture is the same for both levels in all cases one of the by products of the exercise is the observation that unexpected inflation shows a much stronger positive covariation with relative price variability than the expected component

some results on comparative statics under uncertainty this paper presents results on comparative statics for a class of decision problems under uncertainty necessary and sufficient conditions are derived for parameter changes and stochastically dominant shifts in the return in the two asset portfolio problem these results give conditions for the demand for money to be inversely related to the rate of interest further applications include the qualitive behavior of aggregate savings under uncertainty and the production decision of a firm facing price uncertainty copyright 1987 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

monotone comparative statics under uncertainty this paper analyzes monotone comparative statics predictions in several classes of stochastic optimization problems the main results characterize necessary and sufficient conditions for comparative statics predictions to hold based on properties of primitive functions that is utility functions and probability distributions the results apply when the primitives satisfy one of the following two properties i a single crossing property which arises in applications such as portfolio investment problems and auctions or ii log supermodularity which arises in the analysis of demand functions affiliated random variables stochastic orders and orders over risk aversion

stochastic dominance and expected utility while stochastic dominance has been employed in various forms as early as 1932 it has only been since 1969 1970 that the notion has been developed and extensively employed in the area of economics

choosing between risky prospects the characterization of comparative statics results and location independent risk we consider expected utility maximizers choosing from a family of risky prospects and examine how choice is influenced by the decision makers attitude to risk if the family of risky prospects can be ordered so that as decision makers are more risk tolerant they choose a gamble higher in the ordering then it is natural to say that the family of risky prospects admit a comparative static result the paper characterizes when comparative static results of this sort exist an application is to propose a criterion of location independent riskiness

asset proportions in optimal portfolios the paper is concerned with conditions under which the proportion of a given asset in the optimal portfolio of a risk averse agent is at least as large as some given proportion the paper provides a condition that is necessary and sufficient for such a result to hold the analysis is then confined to portfolios in which the distributions of assets differ by either a first degree stochastic dominance shift or by a mean preserving shift examples are provided to show that under some conditions a risk averter may invest a smaller proportion of his wealth in the dominating asset than in the dominated asset the paper then provides conditions that are necessary and sufficient for a risk averter to invest more in the dominating asset the question of whether risk averse agents should or should not choose diversified portfolios as opposed to specialized ones has been analysed quite extensively in the literature examples of such works are samuelson 1967 brumelle 1974 hadar and russell 1974 russell and seo 1979 hadar and seo 1980 and macminn 1984 what has not been examined at all except for very special cases is the question of the optimal proportions of the various assets in a diversified portfolio in this paper we present conditions which imply that the optimal amount invested in a particular asset is at least as large as some given proportion of the available fund in the case of two asset portfolios one may especially want to know which of the two assets represents more than half the investible fund indeed we find it convenient to start the analysis with the two asset case while the extension to n asset protfolios is essentially straightfoward it is presented in a subsequent section focusing first on the two asset case will make it easier for the reader to see the main logical steps in the proofs of the theorems some of our analysis is facilitated by the use of a particular subset of risk averters this subset has the property that if its members behave in a particular way then all risk averters behave in that way we refer to such a subset as a representative set of all risk averters 2 the usefulness of the representative set derives from the fact that its members have utility functions of a very simple form consisting of two linear pieces and its applicability to the problems on hand derives from the fact that any concave function can be approximated by a linear combination of members of the representative set in the next section we present some formal results demonstrating the equivalence of unanimity among members of the representative set and unanimity among all risk averters in certain types of choice situations these theorems are then used in section 3 in which we present the results about optimal asset proportions

money and price dispersion in the united states this paper reports an empirical test of a price dispersion equation using data on the u s after world war ii the equation derived elsewhere from a version of the partial informationlocalized market models relates price dispersion to the magnitude of the aggregate shocks in order to test the model a price dispersion series is computed using annual wholesale price indexes and weights for the period 1948 76 the data on money shocks are the unanticipated money growth series estimated by barro the tests also include a measure of aggregate real disturbances from the theoretical point of view the results are negative they do not detect an effect of money shocks on price dispersion but support the predicted effect of real shocks