Zhang, S.——Mathematical Problems in Engineering: Pessimistic Portfolio Choice with One Safe and One Risky Asset and Right Monotone Probability Difference O...
时间:2013-11-22
As is well known, a first-order dominant deterioration in risk does not necessarily cause a risk-averse investor to reduce his holdings of that deteriorated asset under the expected utility framework, even in the simplest portfolio setting with one safe asset and one risky asset. The purpose of this paper is to derive conditions on shifts in the distribution of the risky asset under which the counterintuitive conclusion above can be overthrown under the rank-dependent expected utility framework,