scholarly journals Time-series tests of a non-expected-utility model of asset pricing

1993 ◽  
Vol 37 (5) ◽  
pp. 1083-1100 ◽  
Author(s):  
Philippe Jorion ◽  
Alberto Giovannini
Keyword(s):  
Time Series ◽  
Asset Pricing ◽  
Expected Utility ◽  
Utility Model ◽  
Expected Utility Model

scholarly journals Stocks as Lotteries: The Implications of Probability Weighting for Security Prices

2008 ◽  
Vol 98 (5) ◽  
pp. 2066-2100 ◽  
Author(s):  
Nicholas Barberis ◽  
Ming Huang
Keyword(s):  
Asset Pricing ◽  
Prospect Theory ◽  
Expected Utility ◽  
Cumulative Prospect Theory ◽  
Excess Return ◽  
Probability Weighting ◽  
Utility Model ◽  
Security Prices ◽  
Global Optima ◽  
Expected Utility Model

We study the asset pricing implications of Tversky and Kahneman's (1992) cumulative prospect theory, with a particular focus on its probability weighting component. Our main result, derived from a novel equilibrium with nonunique global optima, is that, in contrast to the prediction of a standard expected utility model, a security's own skewness can be priced: a positively skewed security can be “overpriced” and can earn a negative average excess return. We argue that our analysis offers a unifying way of thinking about a number of seemingly unrelated financial phenomena. (JEL D81, G11, G12)

The Expected Utility of Insurance

2019 ◽  
pp. 8-47
Author(s):  
Brad Epperly
Keyword(s):  
Expected Utility ◽  
Judicial Independence ◽  
Utility Model ◽  
Personal Security ◽  
Power Means ◽  
Democratic Regimes ◽  
The Future ◽  
Autocratic Regimes ◽  
Expected Utility Model

This chapter offers a new version of popular “insurance” models of judicial independence, in which the competitiveness of the electoral arena induces leaders to prefer more independent courts, as a means of offering policy and personal security if they lose power. That is, paying the “premium” of increased constraints on behavior imposed by independent courts now for the insurance of protection in the future if out of office. The crux of the argument is that the risks associated with losing power in autocratic regimes are greater than in democracies, and therefore competition should be more salient in dictatorships than democracies. The stakes are higher because autocratic power means access to wealth and state resources in a way rarely equaled in democratic regimes, and more importantly the likelihood of being punished after leaving office is greater for former autocrats. Judiciaries exercising greater independence, however, can minimize the risks of being a former leader, and the chapter leverages this finding to develop an expected utility model, the empirical implication of which is higher salience of competition—when present—in autocracies. Unlike previous theories of how competition affects independence, this model integrates both the likelihood of losing office and the risks associated with such an outcome, and thus allows us to examine the phenomena across the democracy/dictatorship divide.

Dynamic safety first expected utility model

2018 ◽  
Vol 271 (1) ◽  
pp. 141-154 ◽  
Author(s):  
Mei Choi Chiu ◽  
Hoi Ying Wong ◽  
Jing Zhao
Keyword(s):  
Expected Utility ◽  
Utility Model ◽  
Expected Utility Model ◽  
Safety First
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