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The no-trade interval of Dow and Werlang: Some clarifications

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  • Chateauneuf, Alain
  • Ventura, Caroline

Abstract

The aim of this paper is two-fold: first, to emphasize that the seminal result of Dow and Werlang (1992) remains valid under weaker conditions, and this even if non-positive prices are considered, or equally that the no-trade interval result is robust when considering assets which can yield non-positive outcomes. Second, to make precise the weak uncertainty aversion behavior characteristic of the existence of such an interval.

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Bibliographic Info

Article provided by Elsevier in its journal Mathematical Social Sciences.

Volume (Year): 59 (2010)
Issue (Month): 1 (January)
Pages: 1-14

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Handle: RePEc:eee:matsoc:v:59:y:2010:i:1:p:1-14

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Web page: http://www.elsevier.com/locate/inca/505565

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Keywords: Decision theory Choquet expected utility No-trade interval Perfect hedging Comonotone diversification Capacity;

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  1. Paolo Ghirardato & Massimo Marinacci, 2000. "Risk, Ambiguity and the Separation of Utility and Beliefs," Econometric Society World Congress 2000 Contributed Papers 1143, Econometric Society.
  2. David Schmeidler, 1989. "Subjective Probability and Expected Utility without Additivity," Levine's Working Paper Archive 7662, David K. Levine.
  3. Asano, Takao, 2006. "Portfolio inertia under ambiguity," Mathematical Social Sciences, Elsevier, Elsevier, vol. 52(3), pages 223-232, December.
  4. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, Econometric Society, vol. 47(2), pages 263-91, March.
  5. Moez Abouda, 2008. "Decreasing absolute risk aversion : some clarification," Documents de travail du Centre d'Economie de la Sorbonne, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne b08024, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  6. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
  7. Alain Chateauneuf & Rose Anne Dana & Jean-Marc Tallon, 2002. "Diversification, convex preferences and non-empty core in the Choquet expected utility model," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00174770, HAL.
  8. Wakker, Peter, 1990. "Characterizing optimism and pessimism directly through comonotonicity," Journal of Economic Theory, Elsevier, vol. 52(2), pages 453-463, December.
  9. Quiggin, John, 1982. "A theory of anticipated utility," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 323-343, December.
  10. Yaari, Menahem E, 1987. "The Dual Theory of Choice under Risk," Econometrica, Econometric Society, Econometric Society, vol. 55(1), pages 95-115, January.
  11. Moez Abouda & Alain Chateauneuf, 2002. "Positivity of bid-ask spreads and symmetrical monotone risk aversion ," Theory and Decision, Springer, Springer, vol. 52(2), pages 149-170, March.
  12. Dow, James & Werlang, Sergio Ribeiro da Costa, 1992. "Uncertainty Aversion, Risk Aversion, and the Optimal Choice of Portfolio," Econometrica, Econometric Society, Econometric Society, vol. 60(1), pages 197-204, January.
  13. Moez Abouda, 2008. "Decreasing absolute risk aversion : some clarification," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00270648, HAL.
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Cited by:
  1. Alessandra Cillo & Philippe Delquié, 2013. "Mean-Risk Analysis with Enhanced Behavioral Content," Working Papers 498, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  2. Rinaldi, Francesca, 2009. "Endogenous incompleteness of financial markets: The role of ambiguity and ambiguity aversion," Journal of Mathematical Economics, Elsevier, vol. 45(12), pages 880-901, December.
  3. Daniele Pennesi, 2013. "Endogenous Status Quo," Carlo Alberto Notebooks 314, Collegio Carlo Alberto.

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