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Speculative Holdings under Linear Expectation Processes---A Mean-Variance Approach

Lien, Da-Hsiang Donald (1984) Speculative Holdings under Linear Expectation Processes---A Mean-Variance Approach. Social Science Working Paper, 533. California Institute of Technology , Pasadena, CA. (Unpublished) https://resolver.caltech.edu/CaltechAUTHORS:20170919-144858256

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Abstract

In this paper, we considered a discrete time abstract market model where the associated commodity is storable. Also, instead of assuming expected profit maximizing speculators, we assumed they employed mean-variance approaches. Within this framework, given a non-degenerate quadratic inventory cost function and a linear expectation process, the optimal speculative carryover may be decomposed into four components of which two are special features arising from mean-variance considerations. Furthermore, assuming a linear non-speculative excess demand function, Friedman's conjecture (i.e., profitable speculation necessarily stabilizes prices) holds from an ex ante point of view.


Item Type:Report or Paper (Working Paper)
Additional Information:I am indebted to James Quirk for helpful discussions and editings, also to Richard McKelvey for comments on earlier drafts. All errors, of course, remain mine.
Group:Social Science Working Papers
Series Name:Social Science Working Paper
Issue or Number:533
Record Number:CaltechAUTHORS:20170919-144858256
Persistent URL:https://resolver.caltech.edu/CaltechAUTHORS:20170919-144858256
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:81582
Collection:CaltechAUTHORS
Deposited By: Jacquelyn Bussone
Deposited On:19 Sep 2017 22:00
Last Modified:03 Oct 2019 18:44

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