The Simplest Non-Expected Utility Model for Lottery and Portfolio Choices
Abstract: This paper explores a particularly simple model of choice under risk, based on geometric means and entropy. Despite its simplicity, it satisfies various prudence and risk aversion conditions, is consistent with the Allais paradox, and generates various insurance-related results. Within a portfolio framework with compounded reinvestments, our index fits the risks/rewards data from post-war US stock market returns and recent international markets, at least as well as does the standard deviation measures more typically used. It also generates returns that are consistent with the equity premium puzzle.
- Location
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Deutsche Nationalbibliothek Frankfurt am Main
- Extent
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Online-Ressource
- Language
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Englisch
- Bibliographic citation
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The Simplest Non-Expected Utility Model for Lottery and Portfolio Choices ; volume:12 ; number:1 ; year:2018 ; extent:36
Asia-Pacific journal of risk and insurance ; 12, Heft 1 (2018) (gesamt 36)
- Creator
- DOI
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10.1515/apjri-2017-0006
- URN
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urn:nbn:de:101:1-2405121650108.562702365544
- Rights
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Open Access; Der Zugriff auf das Objekt ist unbeschränkt möglich.
- Last update
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14.08.2025, 10:45 AM CEST
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Associated
- Butler, Richard
- Lambson, Val E.
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