Hostname: page-component-586b7cd67f-dlnhk Total loading time: 0 Render date: 2024-11-20T19:25:22.464Z Has data issue: false hasContentIssue false
  • English
  • Français

On the Necessary Condition for Linear Sharing and Separation: A Note

Published online by Cambridge University Press:  06 April 2009

Chi-fu Huang  and
Robert Litzenberger
Get access Rights & Permissions [Opens in a new window]

Abstract

A necessary and sufficient condition for linear sharing rules to be Pareto optimal, as generally accepted by the finance community, is that utility functions be of the equicautious HARA class. We demonstrate that this condition is not necessary for a fixed distribution of initial endowments and derive the necessary and sufficient condition. We show examples of utility functions satisfying our conditions.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 20 , Issue 3 , September 1985 , pp. 381 - 384
Copyright
Copyright © School of Business Administration, University of Washington 1985

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

[1]Amershi, A. H., and Stoeckenius, J. H. W.. “A Unified Theory of Syndicates, Aggregation and Separation in Financial Markets.” Research Paper No. 614, Graduate School of Business, Stanford University (1981).Google Scholar
[2]Borch, K. “Equilibrium in a Reinsurance Market.” Ecorwmetrica, Vol. 30 (07 1962), pp. 424–444.CrossRefGoogle Scholar
[3]Cass, D., and Stiglitz, J.. “The Structure of Investor Preferences and Asset Returns, and Separability in Portfolio Allocation: A Contribution to Pure Theory of Mutual Funds.” Journal of Economic Theory, Vol. 2 (06 1970), pp. 122–160.CrossRefGoogle Scholar
[4]Mossin, J.Theory of Financial Markets. New York: Prentice-Hall, (1973).Google Scholar
[5]Ross, R. “On the Economic Theory of Agency and the Principle of Similarity.” In Essays on Economic Behavior Under Uncertainty, Balch, M., McFadden, D., and Wu, S., eds. New York: American Elsevier Publishing Co. (1974).Google Scholar
[6]Rubinstein, M. “An Aggregation Theorem for Securities Markets.” Journal of Financial Economics, Vol. 1 (09 1974), pp. 225–244.CrossRefGoogle Scholar
[7]Wilson, R. B. “The Theory of Syndicates.” Econometrica, Vol. 36 (01 1968), pp. 119–132.CrossRefGoogle Scholar