Mean-Variance Portfolio Selection with Reference Dependent Preferences
We study S-shaped utility maximization for the standard portfolio selection problem with one risky and one risk-free asset. We derive a mean-variance criterium of choice, which preserves reference dependence and the reflection effect. Subsequently, we study diversification possibilities and obtain the demand for the risky asset. We close the paper with an alternative interpretation of the criterium in terms of target-based decision making.
|Date of creation:||Apr 2007|
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- Pyle, David H & Turnovsky, Stephen J, 1970. "Safety-First and Expected Utility Maximization in Mean-Standard Deviation Portfolio Analysis," The Review of Economics and Statistics, MIT Press, vol. 52(1), pages 75-81, February.
- Marco LiCalzi, 2005. "A language for the construction of preferences under uncertainty," Game Theory and Information 0509002, EconWPA.
- repec:cpi:cpijrn:6.1.2010:i=5496 is not listed on IDEAS
- Erio Castagnoli & Marco LiCalzi, 2005. "Expected utility without utility," Game Theory and Information 0508004, EconWPA.
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