Pessimistic portfolio allocation and Choquet expected utility

Gilbert W. Bassett Jr Bassett, Roger Koenker and Gregory Kordas

No 09/04, CeMMAP working papers from Institute for Fiscal Studies

Abstract: Recent developments in the theory of choice under uncertainty and risk yield a pessimistic decision theory that replaces the classical expected utility criterion with a Choquet expectation that accentuates the likelihood of the least favorable outcomes. A parallel theory has recently emerged in the literature on risk assessment. It is shown that a general form of pessimistic portfolio optimization based on the Choquet approach may be formulated as a problem of linear quantile regression.

Date: 2004-06-07
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:azt:cemmap:09/04

DOI: 10.1920/wp.cem.2004.0904

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