Compound Utility and Asset Pricing

摘要：

Compound utility theory (CUT) offers an alternative to prospect theory, modelling nonlinear preferences without probability transformation. Applying CUT to port- folio choice and asset pricing, this paper investigate implications of nonlinear preferences for the structure of stochastic discount factor under various assumptions. Testable hypotheses are derived that seem to enrich current understanding in asset pricing relations significantly. Unlike psychologically motivated approaches that often seems to suggest investor irrational- ity, we show that most of the empirical anomalies can be rationally accommodated by the assumption that investors have quasiconcave preferences in probabilities. In addition, this study leads to a convenient framework for empirical investigations of the structure and behavior of stochastic discount factors under upper- and lower-market conditions separately.

关键词： compound utility reference point consumption investment asset pricing disutility aversion upper-market beta lower-market beta

作者: Liang Zou

作者单位: Finance Group, University of Amsterdam Business School, Roetersstraat 11, 1018 WB Amsterdam, The Netherlands

会议类型: 国际会议

会议名称: 2005年中国金融国际年会

会议地点: 昆明

会议语种:英文

页码: 1-30

在线出版日期: 2005-07-05（万方平台首次上网日期，不代表论文的发表时间）