A Utility Theoretic Basis for 'Generalized' Mean-Coefficient of Variation (MCV) Analysis

Posted: 27 Aug 2014

See all articles by Ronald E. Shrieves

Ronald E. Shrieves

University of Tennessee, Knoxville - Department of Finance

John M. Wachowicz

University of Tennessee - Knoxville

Date Written: December 1, 1981

Abstract

The coefficient of variation (CV) in investment returns is often presented in introductory finance texts as a measure of project risk [7, 9, 13, 15]. Curiously, the resulting mean-coefficient of variation (MCV) efficiency criterion is usually casually proposed as an alternative to the more widely recommended mean-standard deviation (MSD) definition of efficiency, as if MCV possessed an obvious intuitive appeal for some investors or some investment situations. The pervasiveness of references to CV as a risk measure is perplexing in light of the absence of utility theoretic underpinnings, especially by contrast with the substantial theoretical effort underlying the MSD notion of efficiency [3, 6, 8, 10, 11, 12].

Suggested Citation

Shrieves, Ronald E. and Wachowicz, John M., A Utility Theoretic Basis for 'Generalized' Mean-Coefficient of Variation (MCV) Analysis (December 1, 1981). Journal of Financial and Quantitative Analysis (JFQA), Vol. 16, No. 5, p. 671, 1981, Available at SSRN: https://ssrn.com/abstract=2487460

Ronald E. Shrieves (Contact Author)

University of Tennessee, Knoxville - Department of Finance ( email )

Knoxville, TN 37996
United States

John M. Wachowicz

University of Tennessee - Knoxville ( email )

Knoxville, TN 37996
United States
865-974-1729 (Phone)

HOME PAGE: http://web.utk.edu/~jwachowi/wacho_hp.htm

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