Asset pricing under quantile utility maximization

Bruno Giovannetti

Review of Financial Economics, 2013, vol. 22, issue 4, 169-179

Abstract: “Focus on the downside, and the upside will take care of itself” is a famous quote among professional investors. By considering an agent who follows this advice, we reproduce the first and second moments of stock returns, risk-free rate and consumption growth. The agent's behavior toward risk is analogous to a relative risk aversion of about 3 under expected utility, the elasticity of intertemporal substitution is about 0.5 and the time discount factor is below 1. In particular, the proposed model separates time and risk preferences in an innovative way.

Keywords: Asset prices; Downside risk; Quantile utility (search for similar items in EconPapers)
JEL-codes: G11 G12 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (20)

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Journal Article: Asset pricing under quantile utility maximization (2013)
Working Paper: Asset Pricing under Quantile Utility Maximization (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:revfin:v:22:y:2013:i:4:p:169-179

DOI: 10.1016/j.rfe.2013.05.008

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