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Revisiting the Expected Utility Theory and the Consumption CAPM

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  • Sapre, Nikhil

Abstract

The concept of utility is the core component of many foundational theories in social sciences. It has evolved from a philosophical belief that people seek happiness and satisfaction to a mathematically derived theory in economics and finance. Beginning with a brief review of the developments in the Expected Utility Theory (EUT) and its applicability in equity pricing, this paper includes a critical appraisal of relevant theoretical and empirical studies from the fields of financial economics and behavioural studies, with a particular focus on the the Consumption Capital Asset Pricing Model (CCAPM).

Suggested Citation

  • Sapre, Nikhil, 2021. "Revisiting the Expected Utility Theory and the Consumption CAPM," MPRA Paper 106668, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:106668
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    File URL: https://mpra.ub.uni-muenchen.de/106668/1/MPRA_paper_106668.pdf
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    More about this item

    Keywords

    Expected Utility; Choice Behaviour; Equity Pricing; CCAPM;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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