Expanded Semi-Variance Risk Measurement Model And Application In Project-Investment And Portfolio Select

Risk-measuring theory is the basic theory of economics and finance. The accurate measurement of the risk is the precondition that should be imposed on the correct decision-making, and the compact mathematic form makes the decision-making possible by some rules. I think that it possesses theoretical rationality to adopt the expanded Semi-Variance to measure the risk, simultaneously, based on approximate treatment, we can easily figure out the risk, and make decision quickly.The mean-risk rule applies the two quantitative characters: expectation (excess expected income) and risk to help us choose the optimal decision, so the reasonability of the decision-making rule vitally depends upon the mathematic measuring form of risk. If it is reasonable, we will get the best project, otherwise, the mean-risk rule will fail to lead to correct outcome. This paper has discussed the properties of using expanded Semi-Variance to measuring the risk, and I find that if the outcome is exclusive, this outcome is the stochastic dominance efficient; if there is more than one outcome, the stochastic dominance efficient result is among these outcomes.Under the parameter X to reflect the investors" risk preference, the mean-risk rule can be used in decision-making by all kinds of people who have different risk preference. Upon revising Markowitz's theory, I have put up with two methods to get the combined Semi-variance from the single possess' Semi-variance. As compared with the outcomes of the two models, we get the conclusion: my model develops the Markowitz's model.This paper has the following five innovations: I Extending the Semi-Variance to the expanded Semi-Variance, I concluded that it accords with modern risk-measuring theory to use Semi-Variance. II This paper discussed thoroughly the theoretical basis of mean-expanded Semi-Variance, and I found that expanded Semi-Variance measuring the risk has more advantages than those of traditional risk-measuring methods. III As seen from two aspects, this paper extended the Oryczak's A parameter, and the expanded rule expressed fully the decision-maker's risk preference. IV This paper put up with mean-expanded Semi-Variance, and used this rule to chose the best project in direct project-investment, and furthermore, this rule was over the old rules' invalidation. V Abandoning the hypothesis of risk aversion, this paper revised his model to a new one that can be used by the risk neutral.