AMBIGUITY AND PORTFOLIO INERTIA

Marcello Basili and Fulvio Fontini

International Journal of Theoretical and Applied Finance (IJTAF), 2002, vol. 05, issue 08, 785-795

Abstract: In this paper the Portfolio Choice problem is studied under ambiguity, formalized by means of the Choquet Expected Utility. Agents are supposed to be Choquet Expected Utility maximizers and are split into two categories: optimists, who hold a concave capacity, and pessimists, who hold a convex one. Portfolio inertia is defined and analyzed. Necessary and sufficient conditions are established between a specific structure of agents' beliefs, namely belief commonality, and Portfolio Inertia.

Keywords: Ambiguity; optimism and pessimism; choquet asset pricing rule; portfolio inertia (search for similar items in EconPapers)
Date: 2002
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DOI: 10.1142/S0219024902001699

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