Working Paper: NBER ID: w0573
Authors: David S. Jones
Abstract: This paper discusses the issue of consistent simple sum aggregation over assets within the context of expected utility maximizing investors. The first part of the paper extends the Hicks and Leontief aggregation theorems of consumer choice theory to the portfolio choice problem. Next, necessary and sufficient conditions for consistent simple sum aggregation are derived for Nerton's (1973) continuous-time trading model of investor behavior. Results relating to the construction of consistent rate of return indices for simple sum composite assets are also presented.
Keywords: No keywords provided
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| constant relative rates of return (G12) | consistent simple sum aggregation (C43) |
| investor constraints to hold assets in fixed proportions (G11) | consistent simple sum aggregation (C43) |
| covariance structure of asset returns (C10) | consistent simple sum aggregation (C43) |