TY - JOUR
AU - Friedman,Benjamin M.
AU - Roley,V. Vance
TI - A Note on the Derivation of Linear Homogeneous Asset Demand Functions
JF - National Bureau of Economic Research Working Paper Series
VL - No. 345
PY - 1979
Y2 - May 1979
DO - 10.3386/w0345
UR - http://www.nber.org/papers/w0345
L1 - http://www.nber.org/papers/w0345.pdf
N1 - Author contact info:
Benjamin M. Friedman
Department of Economics
Littauer Center 127
Harvard University
Cambridge, MA 02138
Tel: 617/495-4246
Fax: 617/495-7730
E-Mail: bfriedman@harvard.edu
V. Vance Roley
Department of Finance/DJ-10
Graduate School of Business
University of Washington
Seattle, WA 98195
Tel: 206/545-7476
E-Mail: vroley@u.washington.edu
AB - Among the numerous familiar sets of specific assumptions sufficient to derive mean-variance portfolio behavior from more general expected utility maximization in continuous time, the assumptions of constant relative risk aversion and joint normally distributed asset return assessments are also jointly sufficient to derive asset demand functions with the two desirable (and frequently simply assumed) properties of wealth homogeneity and linearity in expected returns. In addition, in discrete time constant relative risk aversion and joint normally distributed asset return assessments are sufficient to yield linear homogeneous asset demands as approximations if the time unit is small.
ER -