Distributional Analysis of Portfolio Choice
CFDP Revision Date
We compare trading in a market with receiving some particular consumption bundle, given increasing state-independent preferences and complete markets. The analysis focuses on the distributional price of the particular bundle. The distributional price is the price of the cheapest utility-equivalent bundle sold in the market. The distributional price is determined by the distributional functions of the outside bundle and the state price density. Simple portfolio performance measures illustrate the value of the approach. Unlike CAPM-based measures, these measures are valid even when superior information is the source of superior performance.
Dybvig, Philip H., "Distributional Analysis of Portfolio Choice" (1987). Cowles Foundation Discussion Papers. 1070.