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Pessimistic portfolio allocation and Choquet expected utility

Author

Listed:
  • Gilbert W. Bassett Jr Bassett

    (Institute for Fiscal Studies)

  • Roger Koenker

    (Institute for Fiscal Studies and UCL)

  • Gregory Kordas

    (Institute for Fiscal Studies)

Abstract

Recent developments in the theory of choice under uncertainty and risk yield a pessimistic decision theory that replaces the classical expected utility criterion with a Choquet expectation that accentuates the likelihood of the least favorable outcomes. A parallel theory has recently emerged in the literature on risk assessment. It is shown that a general form of pessimistic portfolio optimization based on the Choquet approach may be formulated as a problem of linear quantile regression.

Suggested Citation

  • Gilbert W. Bassett Jr Bassett & Roger Koenker & Gregory Kordas, 2004. "Pessimistic portfolio allocation and Choquet expected utility," CeMMAP working papers CWP09/04, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    • Handle: RePEc:ifs:cemmap:09/04
    as

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    References listed on IDEAS

    as
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