Using Target-oriented Utility to Elicit Preferences for Taking Risks in Uncertain Financial Markets

Consistent with Bernoulli’s interpretation of utility, investment managers determine their clients’ preference for risk by directly asking clients about their willingness to take risks. Many investors find answering such questions difficult. Consistent with Simon’s theory of bounded rationality, other investment managers ask clients how much money they will eventually want to withdraw from their investment…
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July 9, 2020 0