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Choice-Based Elicitation and Decomposition of Decision Weights for Gains and Losses Under Uncertainty
Abdellaoui, Mohammed; Vossman, Frank; Weber, Martin - C.E.P.R. Discussion Papers - 2003
This Paper reports the results of an experimental parameter-free elicitation and decomposition of decision weights under uncertainty. Assuming cumulative prospect theory, utility functions were elicited for gains and losses at an individual level using the trade-off method. Then decision weights...
Persistent link: https://www.econbiz.de/10005792132
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Model Misspecification and Under-Diversification
Uppal, Raman; Wang, Tan - C.E.P.R. Discussion Papers - 2002
asset returns. Our contribution is to develop a framework that allows for ambiguity about the joint distribution of returns … for all stocks being considered for the portfolio, and also for different levels of ambiguity for the marginal … international equity returns. The calibration shows that when the overall ambiguity about the joint distribution of returns is high …
Persistent link: https://www.econbiz.de/10005504745
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Portfolio Selection with Parameter and Model Uncertainty: A Multi-Prior Approach
Garlappi, Lorenzo; Uppal, Raman; Wang, Tan - C.E.P.R. Discussion Papers - 2005
In this paper, we show how an investor can incorporate uncertainty about expected returns when choosing a mean-variance optimal portfolio. In contrast to the Bayesian approach to estimation error, where there is only a single prior and the investor is neutral to uncertainty, we consider the case...
Persistent link: https://www.econbiz.de/10005791415
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Portfolio Selection with Parameter and Model Uncertainty: A Multi-Prior Approach
Garlappi, Lorenzo; Uppal, Raman; Wang, Tan - C.E.P.R. Discussion Papers - 2005
In this paper, we show how an investor can incorporate uncertainty about expected returns when choosing a mean-variance optimal portfolio. In contrast to the Bayesian approach to estimation error, where there is only a single prior and the investor is neutral to uncertainty, we consider the case...
Persistent link: https://www.econbiz.de/10005124485
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Keynes Meets Markowitz: The Trade-off Between Familiarity and Diversification
Boyle, Phelim; Garlappi, Lorenzo; Uppal, Raman; Wang, Tan - C.E.P.R. Discussion Papers - 2010
assets - and Markowitz - who advocates diversification across assets. We rely on the concepts of ambiguity and ambiguity … degree of ambiguity across assets, and (ii) the standard deviation of the estimate of expected return on each asset. If the … standard deviation of the expected return estimate and the difference between the ambiguity about familiar and unfamiliar …
Persistent link: https://www.econbiz.de/10008468537
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Monotone Risk Aversion
Nielsen, Lars Tyge - C.E.P.R. Discussion Papers - 1997
This paper shows that a strictly increasing and risk averse utility function with decreasing absolute risk aversion is necessarily differentiable with a positive and absolutely continuous derivative. The cumulative absolute risk aversion function, which is defined as the negative of the...
Persistent link: https://www.econbiz.de/10005788924
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Irreversible Investment with Strategic Interactions
Mason, Robin; Weeds, Helen - C.E.P.R. Discussion Papers - 2001
This Paper examines irreversible investment in a project with uncertain returns, when there is an advantage to being the first to invest, and externalities to investing when others also do so. Pre-emption decreases and may even eliminate the option values created by irreversibility and...
Persistent link: https://www.econbiz.de/10005789033
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Pill, Patch or Shot? Subjective Expectations and Birth Control Choice
Delavande, Adeline - C.E.P.R. Discussion Papers - 2005
When choosing a contraception method, women base their decisions on their subjective expectations about the realizations of method-related outcomes. Examples of such outcomes include getting pregnant, contracting a sexually transmitted disease (STD) or experiencing side effects. By conducting a...
Persistent link: https://www.econbiz.de/10005791196
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Entry Mistakes, Entrepreneurial Boldness and Optimism
Brocas, Isabelle; Carrillo, Juan D - C.E.P.R. Discussion Papers - 1999
We analyze the investment decision of a population of time inconsistent entrepreneurs who overweight current payoffs relative to future returns. We show that, in order to avoid inefficient procrastination, agents may find it optimal to keep optimistic priors about their chances of success and...
Persistent link: https://www.econbiz.de/10005791696
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Strategic Financial Innovation in Segmented Markets
Rahi, Rohit; Zigrand, Jean-Pierre - C.E.P.R. Discussion Papers - 2004
We analyse an equilibrium model with restricted investor participation in which strategic arbitrageurs play an innovation game and exploit the resulting mispricings by reaping trading profits. Since the equilibrium asset structure is not chosen by a social planner, it is chosen to maximize...
Persistent link: https://www.econbiz.de/10005791699