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Pessimistic portfolio allocation and Choquet expected utility

Gilbert Bassett, Roger Koenker and Gregory Kordas
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Gregory Kordas: Institute for Fiscal Studies

No CWP09/04, CeMMAP working papers from Centre for Microdata Methods and Practice, 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.

New Economics Papers: this item is included in nep-rmg
Date: 2004-06-07
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Journal Article: Pessimistic Portfolio Allocation and Choquet Expected Utility (2004) Downloads
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