On portfolio choice with savoring and disappointment

E. Jouini, P. Karehnke, C. Napp

Research output: Contribution to journalArticleScientificpeer-review

6 Citations (Scopus)

Abstract

We revisit the model proposed by Gollier and Muermann [Gollier C, Muermann A (2010) Optimal choice and beliefs with ex ante savoring and ex post disappointment. Management Sci. 56(8):1272–1284; hereafter, GM]. In the GM model, for a given lottery, agents form anticipated expected payoffs and the set of possible anticipations is assumed to be exogenously fixed. We propose sets of possible anticipations that are endogenously determined. This permits us to compare and evaluate in a consistent manner lotteries with different supports and to revisit the portfolio choice problem. We obtain new conclusions and interesting insights. Our extended model can rationalize a variety of empirically observed puzzles such as a positive demand for assets with negative expected returns, preference for skewed returns, and underdiversification of portfolios.
Original languageEnglish
Pages (from-to)796-804
JournalManagement Science
Volume60
Issue number3
Early online date7 Oct 2013
DOIs
Publication statusPublished - Mar 2014

Fingerprint Dive into the research topics of 'On portfolio choice with savoring and disappointment'. Together they form a unique fingerprint.

  • Cite this