Disparity, Shortfall, and Twice-Endogenous HARA Utility

We derive a mapping between the shortfall-minimizing portfolio selection based on higher-order entropy measures and expected utility theory. We show that the family of HARA utility functions has a minimum-divergence, shortfall-based representation. This facilitates an interpretation in which the risk aversion parameters and the type of risk aversion arise endogenously. We provide a numerical example illustrating this interpretation.

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Year of publication:	2013
Authors:	Haley, M. Ryan ; McGee, M. Kevin ; Walker, Todd B.
Published in:	Econometric Reviews. - Taylor & Francis Journals, ISSN 0747-4938. - Vol. 32.2013, 4, p. 524-541
Publisher:	Taylor & Francis Journals

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Extent:	text/html
Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010623956