Axiomatic Foundations of Multiplier Preferences
TLDR
The authors axiomatizes the robust control criterion of multiplier preferences introduced by Hansen and Sargent (2001) and establishes a link between the parameters of the multiplier criterion and the observable behavior of the agent.Abstract:
This paper axiomatizes the robust control criterion of multiplier preferences introduced by Hansen and Sargent (2001). The axiomatization relates multiplier preferences to other classes of preferences studied in decision theory. Some properties of multiplier preferences are generalized to the broader class of variational preferences, recently introduced by Maccheroni, Marinacci and Rustichini (2006). The paper also establishes a link between the parameters of the multiplier criterion and the observable behavior of the agent. This link enables measurement of the parameters on the basis of observable choice data and provides a useful tool for applications.read more
Citations
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The fundamental risk quadrangle in risk management, optimization and statistical estimation
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Testing Ambiguity Models through the Measurement of Probabilities for Gains and Losses
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Ambiguous Volatility, Possibility and Utility in Continuous Time
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TL;DR: In this paper, a model of utility for a continuous time framework that captures the decision-maker's concern with ambiguity about both the drift and volatility of the driving process is presented.
References
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Book
Risk, Uncertainty and Profit
TL;DR: In Risk, Uncertainty and Profit, Frank Knight explored the riddle of profitability in a competitive market profit should not be possible under competitive conditions, as the entry of new entrepreneurs would drive prices down and nullify margins, however evidence abounds of competitive yet profitable markets as mentioned in this paper.
Journal ArticleDOI
Risk, Ambiguity, and the Savage Axioms
TL;DR: The notion of "degrees of belief" was introduced by Knight as mentioned in this paper, who argued that people tend to behave "as though" they assigned numerical probabilities to events, or degrees of belief to the events impinging on their actions.
Journal ArticleDOI
Substitution, Risk Aversion, and the Temporal Behavior of Consumption and Asset Returns: A Theoretical Framework
Larry G. Epstein,Stanley E. Zin +1 more
TL;DR: In this paper, a class of recursive, but not necessarily expected utility, preferences over intertemporal consumption lotteries is developed, which allows risk attitudes to be disentangled from the degree of inter-temporal substitutability, leading to a model of asset returns in which appropriate versions of both the atemporal CAPM and the inter-time consumption-CAPM are nested as special cases.