A suggestion for simplifying the theory of asset prices

Cesari, Riccardo (2005) A suggestion for simplifying the theory of asset prices. p. 10. DOI 10.6092/unibo/amsacta/1785.
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Abstract

Using an ordinal approach to utility, in the spirit of Hicks (1962, 1967a), it is possible to greatly simplify the theory of asset prices. The basic assumption is to summarize any probability distribution into its moments so that preferences over distributions can be mapped into preferences over vectors of moments. This implies that assets, like Lancaster’s (1966) consumption goods, are bundles of characteristics and can be directly priced, at the margin, in terms of the market portfolio. Expected utility is not required and both St.Petersburg and Allais paradoxes may be easily solved.

Abstract
Document type
Monograph (Working Paper)
Creators
CreatorsAffiliationORCID
Cesari, Riccardo
Keywords
asset pricing, utility, CAPM, St. Petersburg paradox, Allais paradox
Subjects
DOI
Deposit date
16 Feb 2006
Last modified
17 Feb 2016 14:40
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