Risk Weighted Utility Theory as a Solution to the Equity Premium Puzzle

T. Chauveau and N. Nalpas

Papiers d'Economie Mathématique et Applications from Université Panthéon-Sorbonne (Paris 1)

Abstract: In this paper, we formulate a restatement of the theory of choice under uncertainty. As an alternative to the rank-dependent expected utility model, we develop a probability-altering theory in which the transformation of probabilities is weighted by the centered outcome of the lottery which may be viewed as "pure" risk.

Keywords: RISK; GENERATIONS; FINANCIAL MARKET (search for similar items in EconPapers)
JEL-codes: D81 D92 G12 (search for similar items in EconPapers)
Pages: 43 pages
Date: 1999
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Persistent link: https://EconPapers.repec.org/RePEc:fth:pariem:1999.20

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