SECURITY PRICES, RISK, AND MAXIMAL GAINS FROM DIVERSIFICATION: REPLY.

The author comments on the article "Security Prices, Risk and Maximal Gains from Diversification," by professor John Lintner, concerning a complete general equilibrium model of security price determination under risky conditions. He states that while Lintner's model supersedes his, he believes that some differences between Lintner's results and his own are more apparent than real. He mentions that Lintner and he agreed about efficient portfolios of securities except for differences in the choice of axes to represent the two measures. He states that the main issue of difference is the appropriate measure of risk and suggests that differences can be attributed to the implications drawn from his paper's partial equilibrium analysis and Lintner's general equilibrium analysis.