Crisp monetary acts in multiple-priors models of decision under ambiguity
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In axiomatic models of decision under ambiguity using a set of priors, a clear distinction can be made between acts which are affected by ambiguity and those which are not: the crisp acts. In these multiple-priors models, the decision maker is indifferent between holding a constant act or holding a non constant crisp act with the same expected utility, if it exists. In financial settings, we show that this indifference, together with the standard definition of monetary acts in the Anscombe–Aumann framework, implies that the investor ignores the variance of some assets, a behavior which conflicts with the assumption on which modern portfolio theory has been built. In this paper we establish the geometrical and topological properties of the set of priors that rule out the existence of non constant crisp acts. These properties in turn restrict what can possibly be an unambiguous financial asset.
Keywords: Unambiguous asset; Mean–variance preferences; Ambiguity; Multiple priors; Crisp acts (search for similar items in EconPapers)
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Published in Journal of Mathematical Economics, 2016, 153-161 p
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Journal Article: Crisp monetary acts in multiple-priors models of decision under ambiguity (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02311921
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