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Portfolio Inertia under Ambiguity

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Author Info
Takao Asano
Abstract

We consider individual's portfolio selection problems. Introducing the concept of ambiguity, we show the existence of portfolio inertia under the assumptions that decision maker's beliefs are captured by an inner measure, and that her preferences are represented by the Choquet integral with respect to the inner measure. Under the concept of ambiguity, it is considered that a [sigma]-algebra is not necessarily an appropriate collection of events to which a decision maker assigns probabilities. Furthermore, we study the difference between ambiguity and uncertainty by considering investors' behavior.

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File URL: http://www.iser.osaka-u.ac.jp/library/dp/2004/DP0609.pdf
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Paper provided by Institute of Social and Economic Research, Osaka University in its series ISER Discussion Paper with number 0609.

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Date of creation: Jun 2004
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Handle: RePEc:dpr:wpaper:0609

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  1. Epstein, Larry G & Wang, Tan, 1994. "Intertemporal Asset Pricing Under Knightian Uncertainty," Econometrica, Econometric Society, vol. 62(2), pages 283-322, March. [Downloadable!] (restricted)
  2. Ghirardato, Paolo & Klibanoff, Peter & Marinacci, Massimo, 1998. "Additivity with multiple priors," Journal of Mathematical Economics, Elsevier, vol. 30(4), pages 405-420, November. [Downloadable!] (restricted)
  3. Zhang, Jiankang, 1999. "Qualitative probabilities on [lambda]-systems," Mathematical Social Sciences, Elsevier, vol. 38(1), pages 11-20, July. [Downloadable!] (restricted)
  4. Gilboa, Itzhak, 1987. "Expected utility with purely subjective non-additive probabilities," Journal of Mathematical Economics, Elsevier, vol. 16(1), pages 65-88, February. [Downloadable!] (restricted)
  5. Epstein Larry G. & Wang Tan, 1995. "Uncertainty, Risk-Neutral Measures and Security Price Booms and Crashes," Journal of Economic Theory, Elsevier, vol. 67(1), pages 40-82, October. [Downloadable!] (restricted)
  6. Dow, James & Werlang, Sergio Ribeiro da Costa, 1992. "Uncertainty Aversion, Risk Aversion, and the Optimal Choice of Portfolio," Econometrica, Econometric Society, vol. 60(1), pages 197-204, January. [Downloadable!] (restricted)
  7. Ghirardato, Paolo & Marinacci, Massimo, 2002. "Ambiguity Made Precise: A Comparative Foundation," Journal of Economic Theory, Elsevier, vol. 102(2), pages 251-289, February. [Downloadable!] (restricted)
  8. Lo, Kin Chung, 1999. "Extensive Form Games with Uncertainty Averse Players," Games and Economic Behavior, Elsevier, vol. 28(2), pages 256-270, August. [Downloadable!] (restricted)
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  9. Epstein, Larry G & Zhang, Jiankang, 2001. "Subjective Probabilities on Subjectively Unambiguous Events," Econometrica, Econometric Society, vol. 69(2), pages 265-306, March.
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  10. Epstein, Larry G, 1999. "A Definition of Uncertainty Aversion," Review of Economic Studies, Blackwell Publishing, vol. 66(3), pages 579-608, July. [Downloadable!] (restricted)
  11. Lo, Kin Chung, 1996. "Equilibrium in Beliefs under Uncertainty," Journal of Economic Theory, Elsevier, vol. 71(2), pages 443-484, November. [Downloadable!] (restricted)
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  12. Casadesus-Masanell, Ramon & Klibanoff, Peter & Ozdenoren, Emre, 2000. "Maxmin Expected Utility over Savage Acts with a Set of Priors," Journal of Economic Theory, Elsevier, vol. 92(1), pages 35-65, May. [Downloadable!] (restricted)
  13. Marinacci, Massimo, 2000. "Ambiguous Games," Games and Economic Behavior, Elsevier, vol. 31(2), pages 191-219, May. [Downloadable!] (restricted)
  14. Ghirardato, Paolo, 1997. "On Independence for Non-Additive Measures, with a Fubini Theorem," Journal of Economic Theory, Elsevier, vol. 73(2), pages 261-291, April. [Downloadable!] (restricted)
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  15. Dow James & Werlang Sergio Ribeiro Da Costa, 1994. "Nash Equilibrium under Knightian Uncertainty: Breaking Down Backward Induction," Journal of Economic Theory, Elsevier, vol. 64(2), pages 305-324, December. [Downloadable!] (restricted)
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