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A Risk-neutral Characterization of Optimization and Pessimism and its Applications

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  • Osaki, Yusuke
  • Quiggin, John

Abstract

This note gives a simple, but useful characterization of optimism and pessimism represented by a convex and concave shift of probability weighting functions, and applies it to two comparative static analysis.

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File URL: http://purl.umn.edu/151180
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Bibliographic Info

Paper provided by University of Queensland, School of Economics in its series Risk and Sustainable Management Group Working Papers with number 151180.

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Date of creation: 2007
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Handle: RePEc:ags:uqsers:151180

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Related research

Keywords: Optimism; pessimism; rank dependent expected utility; risk–neutral decision weight; Research Methods/ Statistical Methods; Risk and Uncertainty; D81;

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References

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  1. repec:ebl:ecbull:v:4:y:2005:i:8:p:1-8 is not listed on IDEAS
  2. Diecidue, Enrico & Wakker, Peter P, 2001. " On the Intuition of Rank-Dependent Utility," Journal of Risk and Uncertainty, Springer, vol. 23(3), pages 281-98, November.
  3. Quiggin, John, 1982. "A theory of anticipated utility," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 323-343, December.
  4. Yusuke Osaki, 2005. "Dependent Background Risks and Asset Prices," Discussion Papers in Economics and Business 05-13, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  5. Quiggin, John, 1991. " Comparative Statics for Rank-Dependent Expected Utility Theory," Journal of Risk and Uncertainty, Springer, vol. 4(4), pages 339-50, December.
  6. Ohnishi, Masamitsu & Osaki, Yusuke, 2006. "The comparative statics on asset prices based on bull and bear market measure," European Journal of Operational Research, Elsevier, vol. 168(2), pages 291-300, January.
  7. Susan Athey, 2002. "Monotone Comparative Statics Under Uncertainty," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 187-223, February.
  8. Athey, Susan, 2002. "Monotone Comparative Statics Under Uncertainty," Scholarly Articles 3372263, Harvard University Department of Economics.
  9. Nachman, David C., 1982. "Preservation of "more risk averse" under expectations," Journal of Economic Theory, Elsevier, vol. 28(2), pages 361-368, December.
  10. Hong, Chew Soo & Karni, Edi & Safra, Zvi, 1987. "Risk aversion in the theory of expected utility with rank dependent probabilities," Journal of Economic Theory, Elsevier, vol. 42(2), pages 370-381, August.
  11. Schlee, Edward E, 1994. "The Preservation of Multivariate Comparative Statics in Nonexpected Utility Theory," Journal of Risk and Uncertainty, Springer, vol. 9(3), pages 257-72, December.
  12. Yusuke Osaki, 2005. "Dependent background risks and asset prices," Economics Bulletin, AccessEcon, vol. 4(8), pages 1-8.
  13. Masamitsu Ohnishi & Yusuke Osaki, 2006. "Comparative Risk Aversion under Background Risks Revisited," Discussion Papers in Economics and Business 06-16, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  14. Ryan, Matthew J., 2006. "Risk aversion in RDEU," Journal of Mathematical Economics, Elsevier, vol. 42(6), pages 675-697, September.
  15. Lucas, Robert E, Jr, 1978. "Asset Prices in an Exchange Economy," Econometrica, Econometric Society, vol. 46(6), pages 1429-45, November.
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