Risk-value models

Sarin, Rakesh K. ; Weber, Martin

DOI: https://doi.org/10.1016/0377-2217(93)90033-J
URL: https://www.sciencedirect.com/science/article/pii/...
Additional URL: https://www.semanticscholar.org/paper/Risk-value-m...
Document Type: Article
Year of publication: 1993
The title of a journal, publication series: European Journal of Operational Research : EJOR
Volume: 70
Issue number: 2
Page range: 135-149
Place of publication: Amsterdam [u.a.]
Publishing house: Elsevier
ISSN: 0377-2217
Publication language: English
Institution: Business School > ABWL u. Finanzwirtschaft, insbes. Bankbetriebslehre (Weber -2017)
Subject: 150 Psychology
330 Economics
Keywords (English): Decision analysis , Utility theory , Decisions under risk
Abstract: In this paper we propose a risk-value model for evaluating decisions under risk. In this model preference for a gamble is determined by its riskiness and its value or worth. In a simple form of the risk-value model, risk is measured by variance and value by expected returns. We discuss several other empirically more attractive forms of the risk-value model. We show that the risk-value model provides a framework for unifying the streams of research on risk judgments and on modeling choices. We explore the consistency of the risk-value model with both expected utility and non-expected utility preferences. Specifically, we show that if we define risk and value in appropriate ways, the rank order produced by the risk-value model will be consistent with a suitably chosen expected utility or non-expected utility model. We briefly discuss application of the risk-value model to the theory of finance and to social risk analysis.

Dieser Eintrag ist Teil der Universitätsbibliographie.

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