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EFFICIENCY ANALYSIS OF CHOICES INVOLVING RISK 345
Further analysis on the theoretical side should be devoted to the translation of these
general criteria into equivalent criteria for special families of probability distributions,
of a more flexible nature than the simple, symmetric, two-parameter normal distributions.
Finally, all this should be tied up with the theory of consumption under uncertainty,
by generalization to multivariate utilities and distributions; with the theory of the financial
structure of the firm and its cost of capital; and with a general efficiency analysis of interdependent
risks, with applications to the construction of optimal portfolios, rather than
the choice among alternative, independent, portfolios.
The Hebrew University, G. HANOCH
Jerusalem H. LEVY.
REFERENCES
First version received 15.6.68; final version received 9.1.69
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[4] Cramer, H. Mathematical Methods of Statistics (Princeton University Press,
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[5] Feldstein M. " Mean Variance Analysis in the Theory of Liquidity Preference
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[7] Hadar, J. and Russel, W. R. " Rules for Ordering Uncertain Prospects ", American
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Econometrica, 21, No. 2, April (1953); reprinted as Cowles Commission Papers,
New Series, No. 65.
[11] Hirshleifer, J. "Investment Decision under Uncertainty: Choice-Theoretic
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[12] Lintner, J. " Security Price, Risk and Maximal Gains from Diversification",
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[13] Markowitz, H. M. " Portfolio Selection ", The Journal of Finance, 6, No. 1 (March
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[14] Markowitz, H. M. Portfolio Selection (New York, Wiley, 1959).
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