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Abstract–A Parametric Study of a Household Portfolio Selection Model

Published online by Cambridge University Press:  19 October 2009

Rae Jean B. Goodman
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Extract

We develop a household portfolio selection model that (1) generalizes some aspects of the conventional theory of the portfolio selection process; (2) integrates the investment and financing decisions, and (3) reflects the liability structure of the household. We incorporate the above influences by placing restrictions on the portfolio maximand in the form of probabilistic and deterministic constraints. The maximand is a tradeoff between the expected net value and the volatility of the portfolio as measured by Sharpe's beta coefficient. The maximization of the objective function is restricted by (1) the Cash Flow, (2) the Credit Limit, (3) the Adding-Up, and (4) the Non-Negativity constraints.

Type
III. Portfolio Theory
Information
Journal of Financial and Quantitative Analysis , Volume 10 , Issue 4 , November 1975 , pp. 557
Copyright
Copyright © School of Business Administration, University of Washington 1975

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