Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments April 19, 2016 erstellt
Beschreibung:
Experimental studies show that people's risk preferences depend non-linearly on probabilities, but relatively little is known about how probability weighting influences investment decisions. In this paper we analyze the portfolio choice problem of investors who maximize rank-dependent utility in a single-period complete market. We prove that investors with a less risk averse preference relation in general choose a more risky final wealth distribution, receiving a risk premium in return for accepting conditional-zero-mean noise (more risk). We also propose a new scenario-based notion of less risk taking that can be applied when state probabilities are unknown