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...

This paper uses the concept of Marginal Conditional Stochastic Dominance and a generalization of the 50% Portfolio Rule to develop a tractable and parsimonious methodology for constructing a second degree Stochastic Dominance (SSD) efficient portfolio from a given, inefficient index. Because the...

This paper develops a model of regulated Brownian motion with an endogenous profit term to analyze the role of regulatory credibility on the stability and productivity of the banking system. We show that when regulatory intervention is perfect and costless, the volatility of the system can be...

Purpose – Seeks to analyze the role of population and wealth in determining capital movements between countries. Design/methodology/approach – By applying the Clark-Jokung 50 percent portfolio theorem, considers the specific case of a two country world where the cumulative conditional...

This paper models capital flows in a rich-poor, two-country, two-asset, dual-risk economy with decreasing absolute risk aversion. The first risk is asset-specific. The second is political and dependent; i.e., related to particular asset outcomes. In this framework, the role of wealth in...

In this paper we look at the cumulative conditional expected outcome of two dependent assets. We then develop a conditional stochastic dominance relation between the two assets. We use this to determine the composition of an optimal portfolio. We show that for any concave von Neumann-Morgenstern...

In this article we study the tradeoffs between average output and reduced volatility due to macroeconomic intervention. Using a Keynesian model of regulated Brownian motion with an endogenous producer/investor term, we show that when intervention is perfect and costless, the rewards in terms of...