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Multidimensional Security Pricing

Journal of Financial and Quantitative Analysis 1975 10(5), 785
Portfolio analysis has generally been restricted to problems in, at most, two dimensions, expected return and risk, the latter usually measured by standard deviation. In two papers Jean [2, 4] has attempted to extend the analysis to three and many dimensions by deriving risk premiums as functions of higher order moments. This paper corrects several errors in his work and derives a normative, individual pricing model for risky securities analogous to the capital market line within the framework of a perfect market.