EconPapers    
Economics at your fingertips  
 

Loss Aversion and Ruinous Optimal Wagering in the Markowitz Model of Non-Expected Utility

David Peel and David Law ()
Additional contact information
David Law: Bangor

Economics Bulletin, 2016, vol. 36, issue 2, 688-695

Abstract: The purpose in this note is to demonstrate that the non-expected utility model of Markowitz implies that agents can obtain maximum expected utility from wagering all of their wealth on actuarialy unfair high probability outcomes. In order to remove this property it is necessary to assume that loss aversion tends to infinity as stake size as a proportion of wealth approaches unity.

Keywords: Markowitz Model of Utility; Loss Aversion; Stake as a Proportion of Wealth (search for similar items in EconPapers)
JEL-codes: D8 (search for similar items in EconPapers)
Date: 2016-04-14
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://www.accessecon.com/Pubs/EB/2016/Volume36/EB-16-V36-I2-P67.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ebl:ecbull:eb-15-00620

Access Statistics for this article

More articles in Economics Bulletin from AccessEcon
Series data maintained by John P. Conley ().

 
Page updated 2017-09-29
Handle: RePEc:ebl:ecbull:eb-15-00620