Consistency of mean-variance analysis and expected utility analysis: A complete characterization

Abstract A risk-averse individual's expected utility is a function of mean and variance if and only if the class of random variables to be ranked is completely ordered by Rothschild-Stiglitz increasing risk after normalization by their means.

[1]  H. Sinn.  Economic Decisions Under Uncertainty , 1983 .

[2]  Stephen A. Ross,et al.  Mutual fund separation in financial theory—The separating distributions , 1978 .

[3]  Jack Meyer,et al.  Two Moment Decision Models And Expected Utility Maximization: Some Implications For Applied Research , 1988 .

[4]  G. Chamberlain.  A characterization of the distributions that imply mean—Variance utility functions☆ , 1983 .

[5]  Hans-Werner Sinn,et al.  Two-Moment Decision Models and Expected Utility Maximization: Comment , 1989 .

[6]  M. Rothschild,et al.  Increasing risk: I. A definition , 1970 .

[7]  K. Borch,et al.  A Note on Uncertainty and Indifference Curves , 1969 .

[8]  J. Lintner.  SECURITY PRICES, RISK, AND MAXIMAL GAINS FROM DIVERSIFICATION , 1965 .

[9]  A. Stuart,et al.  Portfolio Selection: Efficient Diversification of Investments , 1959 .

[10]  H. Leland..  Theory of the Firm Facing Uncertain Demand , 1972 .

[11]  Hans-Werner Sinn,et al.  Expected utility, μ-σ preferences, and linear distribution classes: A further result , 1990 .

[12]  James Tobin,et al.  Comment on Borch and Feldstein , 1969 .

[13]  David P. Baron,et al.  ON THE UTILITY THEORETIC FOUNDATIONS OF MEAN‐VARIANCE ANALYSIS , 1977 .

[14]  Jack Meyer,et al.  Sufficient Conditions for Expected Utility to Imply Mean-Standard Deviation Rankings: Empirical Evidence Concerning the Location and Scale Condition , 1992 .

[15]  M. Feldstein,et al.  Mean-Variance Analysis in the Theory of Liquidity Preference and Portfolio Selection , 1969 .

[16]  W. Sharpe.  CAPITAL ASSET PRICES: A THEORY OF MARKET EQUILIBRIUM UNDER CONDITIONS OF RISK* , 1964 .