The Arbitrage Pricing Theorem with non Expected Utility Preferences
AbstractThe arbitrage pricing theorem of finance shows that in certain circumstances the price of a financial asset may be written as a linear combination of the prices of certain market factors. This result is usually proved with von Neumann-Morgenstern preferences. In this paper we show that the result is robust in the sense that it will remain true if certain kinds of non expected utility preferences are used. We consider Machina preferences, the rank dependent model and non-additive subjective probabilities.
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Bibliographic InfoPaper provided by Australian National University - Department of Economics in its series Papers with number 217.
Length: 24 pages
Date of creation: 1990
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Postal: THE AUSTRALIAN NATIONAL UNIVERSITY, DEPARTMENT OF ECONOMICS, RESEARCH SCHOOL of PACIFIC STUDIES, RESEARCH SCHOOL OF SOCIAL SCIENCES, G.P.O. 4, CANBERRA ACT 2601 AUSTRALIA..O. BOX 4 CANBERRA 2601 AUSTRALIA.
Web page: http://economics.anu.edu.au/economics.htm
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prices ; financial market ; economic models;
Other versions of this item:
- Kelsey David & Milne Frank, 1995. "The Arbitrage Pricing Theorem with Non-expected Utility Preferences," Journal of Economic Theory, Elsevier, vol. 65(2), pages 557-574, April.
- David Kelsey & Frank Milne, 1992. "The arbitrage Pricing Theorem with Non Expected Utility Preferences," Working Papers 866, Queen's University, Department of Economics.
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- Aldo Montesano, 2008. "Effects of Uncertainty Aversion on the Call Option Market," Theory and Decision, Springer, vol. 65(2), pages 97-123, September.
- Kelsey, David & Yalcin, Erkan, 2007.
"The arbitrage pricing theorem with incomplete preferences,"
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- Mukerji, Sujoy & Tallon, Jean-Marc, 2001.
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- Sujoy Mukerji & Jean-Marc Tallon, 2000. "Ambiguity Aversion and Incompleteness of Financial Markets," Economics Series Working Papers 46, University of Oxford, Department of Economics.
- Eichberger, Jürgen & Kelsey, David, 2007.
Sonderforschungsbereich 504 Publications
07-50, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim.
- repec:hal:cesptp:halshs-00174539 is not listed on IDEAS
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- Erkan Yalcin, 2002. "Existence of Equilibrium in Incomplete Markets with Non-Ordered Preferences," GE, Growth, Math methods 0204002, EconWPA.
- Naqvi, Nadeem, 2012. "Impossibility of interpersonal social identity diversification under binary preferences," MPRA Paper 41365, University Library of Munich, Germany.
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