期刊
REVIEW OF QUANTITATIVE FINANCE AND ACCOUNTING
卷 51, 期 3, 页码 785-811出版社
SPRINGER
DOI: 10.1007/s11156-017-0688-z
关键词
von Neumann-Morgenstern (vNM) utility theory; Expected utility theory; Kahneman and Tversky (KT); Prospect theory; Framing; Loss aversion; Risk aversion; Risk taking; Absolute risk aversion (ARA); Relative risk aversion (RRA); Subjective probabilities; Decision weights; Objective probabilities; Probability weighting
资金
- Baruch College Fund
The paper reviews the development of von Neumann and Morgenstern (vNM) utility theory. Kahneman and Tversky's (KT's) prospect theory is introduced. The vNM utility function is compared and contrasted with KT's value function. We prove the uniqueness of two popular utility functions. First, we show that all power utility functions possess constant RRA. And, we show that all exponential utility functions have constant ARA. The paper concludes by discussing applications, strengths and weaknesses of various utility functions.
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