Home > Behavioral Econ. > Are Investors Rational and Does it Matter? Determining the Expected Utility Function for a Group of Investors

Are Investors Rational and Does it Matter? Determining the Expected Utility Function for a Group of Investors

Are Investors Rational and Does it Matter? Determining the Expected Utility Function for a Group of Investors

Journal of Behavioral Finance
Volume 12, Issue 2, 2011

John Livanasa

This paper reports on an experiment with a group of 236 Australian superannuation investors to derive an expected utility function for risk and return, and the resulting indifference curves. The paper concludes that the expected utility function is consistent with that anticipated in Markowitz [1952] and Sharpe [1964] except that the investors did not consider time horizon. The paper argues that the analysis of investor behavior is best served by considering the behavior of a group as a whole rather than investors as individuals, and by assessing their choices when faced with successive similar tasks.

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Categories: Behavioral Econ.
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