223017 (M12) Estimating probabilities relevant to calculating relative risk-corrected returns of alternative portfolios : Samuelson P.A., Journal of Risk and Uncertainty, Volume 15, Nr. 3, 1997, pp 191–200

• Book ID: 104300104
• Publisher: Elsevier Science
• Year: 1998
• Tongue: English
• Weight: 91 KB
• Volume: 22
• Category: Article
• ISSN: 0167-6687
• DOI: 10.1016/s0167-6687(98)80080-2

✦ Synopsis

In making all-or-none choices between alternative securities, Samuelson (1997b) suggested that investors of different risk-aversion should calculate from past samples of those securities their relevant Harmonic Means, or Geometric Means, or other associative means representative of their respective degrees of relative-riskaversion. Here it is shown how this learning procedure can be improved upon when you have prior knowledge that the securities have log-normal distributions. Classical estimation theory, concerning consistent, efficient and sufficient statistics, is shown to have a cash value by means of the calculable measure of (ex ante) "riskcorrected certainty equivalents". Needed qualifications and testings are also presented.