Related papers: A Non-Parametric Test of Risk Aversion
We establish a variety of numerical representations of preference relations induced by set-valued risk measures. Because of the general incompleteness of such preferences, we have to deal with multi-utility representations. We look for…
We ask if participants in a choice experiment with repeated presentation of the same menus and no feedback provision: (i) exhibit overall behaviour that is consistent with ordinal and expected utility theory under *weak* preferences; (ii)…
Consider an investor trading dynamically to maximize expected utility from terminal wealth. Our aim is to study the dependence between her risk aversion and the distribution of the optimal terminal payoff. Economic intuition suggests that…
This study provides a solution of the equity premium puzzle. Questioning the validity of the Arrow-Pratt measure of relative risk aversion for detecting the risk behavior of investors under all conditions, a new tool, that is, the…
Under mean-variance-utility framework, we propose a new portfolio selection model, which allows wealth and time both have influences on risk aversion in the process of investment. We solved the model under a game theoretic framework and…
The comparative statics of the optimal portfolios across individuals is carried out for a continuous-time complete market model, where the risky assets price process follows a joint geometric Brownian motion with time-dependent and…
Choice overload - in which larger choice sets are detrimental to a chooser's well-being - is potentially of great importance in the design of economic policy. Yet the current evidence on its prevalence is inconclusive. We argue that…
This paper enhances the pricing of derivatives as well as optimal control problems to a level comprising risk. We employ nested risk measures to quantify risk, investigate the limiting behavior of nested risk measures within the classical…
Challenge Theory (CT), a new approach to decision under risk departs significantly from expected utility, and is based on firmly psychological, rather than economic, assumptions. The paper demonstrates that a purely cognitive-psychological…
The rapid growth of e-commerce has made people accustomed to shopping online. Before making purchases on e-commerce websites, most consumers tend to rely on rating scores and review information to make purchase decisions. With this…
This work presents an asset pricing model that under rational expectation equilibrium perspective shows how, depending on risk aversion and noise volatility, a risky-asset has one equilibrium price that differs in term of efficiency: an…
This article's aim is to provide the solution to the equity premium puzzle without using calibrated values. Calibrated values of subjective time discount factor were used in my prior derived models because 4 variables were determined from 3…
We investigate a continuous-time investment-consumption problem with model uncertainty in a general diffusion-based market with random model coefficients. We assume that a power utility investor is ambiguity-averse, with the preference to…
In hedge funds, convex compensation schemes are adopted to stimulate a high-profit performance for portfolio managers. In economics, non-monotone risk aversion is proposed to argue that individuals may not be risk-averse when the wealth…
Risk and utility functionals are fundamental building blocks in economics and finance. In this paper we investigate under which conditions a risk or utility functional is sensitive to the accumulation of losses in the sense that any…
Forecasting accuracy is routinely optimised in financial prediction tasks even though investment and risk-management decisions are executed under transaction costs, market impact, capacity limits, and binding risk constraints. This paper…
The issue of model risk in default modeling has been known since inception of the Academic literature in the field. However, a rigorous treatment requires a description of all the possible models, and a measure of the distance between a…
In mechanical design, there is often unavoidable uncertainty in estimates of design performance. Evaluation of design alternatives requires consideration of the impact of this uncertainty. Expert heuristics embody assumptions regarding the…
Utility and risk are two often competing measurements on the investment success. We show that efficient trade-off between these two measurements for investment portfolios happens, in general, on a convex curve in the two dimensional space…
We present a theory of expected utility with state-dependent linear utility functions for monetary returns, that incorporates the possibility of loss-aversion. Our results relate to first order stochastic dominance, mean-preserving spread,…