Aspects Reffering to Utility and Risk of Investments Decision Systems

Despa Radu, (), Folcut Ovidiu () and Coculescu Cristina ()
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Despa Radu,: Romanian-American University, Bucharest
Folcut Ovidiu: Romanian-American University, Bucharest
Coculescu Cristina: Romanian-American University, Bucharest

Ovidius University Annals, Economic Sciences Series, 2010, vol. X, issue 1, 618-622

Abstract: The explanation of investment behaviour in the light of expected utility it meant an important step in the substantiation of the theory regarding investment portofolio. It was demonstrated that the linear form of utility function excludes certain decisive decisions (Allais’s paradox), so that in a short period of time from Neumann- Morgenstein’s hypotheses specialists’ attention directed to finding a utility function that would explain as well as possible the relationship with the risk in investment behaviour. The most important contributions on this issue are more recent, from 1980: The hypotheses of „expected diminished utility” of MacCrimmon (1979) and Machina(1982), the hypotheses of „ non-linear expected utility” of John Quiggin (1993), the hypotheses of „ conditional expected utility”, sustained by Chew, Karni si Safra in 1987, the hypotheses of „non-additivity expected utility” of Fishburn (1988) or the hypotheses of „expected utility based on investment behaviour”, brought by Machina (1988).

Keywords: investment behaviour; expected utility; risk; investors’ preference axiom (search for similar items in EconPapers)
JEL-codes: D03 D81 D92 G11 (search for similar items in EconPapers)
Date: 2010
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