Document Type
Working Paper
Publication Date
2001
College/Unit
Chambers College of Business and Economics
Document Number
99-01
Department/Program/Center
Economics
Abstract
This paper relates and extends two strands of literature on behavioral implications of utility function features. A class of utility functions switching preference no more than once between W0 r~ and W0 s~ is identified (r~ and s~ being per-dollar returns of alternative portfolios), as is the subclass permitting only switches to the higher-mean portfolio. This latter subclass, which permits expected utility to be expressed in terms of the mean and suitably defined relative risk of final wealth, never decreases expected per-dollar final wealth and never decreases relative risk of final wealth in optimal n-asset portfolios as initial wealth rises.
Digital Commons Citation
Gelles, Gregory M. and Mitchell, Douglas W., "SWITCHING, MEAN-SEEKING, AND RELATIVE RISK WITH TWO OR MORE RISKY ASSETS" (2001). Economics Faculty Working Papers Series. 251.
https://researchrepository.wvu.edu/econ_working-papers/251