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Observational equivalence and nonequivalence of subjective and robust mean–variance preferences

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  • Wakai, Katsutoshi

Abstract

We identify the conditions where robust mean–variance preferences, which capture ambiguity aversion, are observationally nonequivalent to subjective mean–variance preferences. Conversely, we also provide an example showing that observational equivalence holds regardless of the degree of ambiguity aversion.

Suggested Citation

  • Wakai, Katsutoshi, 2014. "Observational equivalence and nonequivalence of subjective and robust mean–variance preferences," Economics Letters, Elsevier, vol. 124(2), pages 219-221.
    • Handle: RePEc:eee:ecolet:v:124:y:2014:i:2:p:219-221
    DOI: 10.1016/j.econlet.2014.05.019
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    References listed on IDEAS

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    1. Fabio Maccheroni & Massimo Marinacci & Doriana Ruffino, 2013. "Alpha as Ambiguity: Robust Mean‐Variance Portfolio Analysis," Econometrica, Econometric Society, vol. 81(3), pages 1075-1113, May.
    2. Peter Klibanoff & Massimo Marinacci & Sujoy Mukerji, 2005. "A Smooth Model of Decision Making under Ambiguity," Econometrica, Econometric Society, vol. 73(6), pages 1849-1892, November.
    3. Gilboa, Itzhak & Schmeidler, David, 1989. "Maxmin expected utility with non-unique prior," Journal of Mathematical Economics, Elsevier, vol. 18(2), pages 141-153, April.
    4. Daniel Ellsberg, 1961. "Risk, Ambiguity, and the Savage Axioms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 75(4), pages 643-669.
    5. Epstein, Larry G & Wang, Tan, 1994. "Intertemporal Asset Pricing Under Knightian Uncertainty," Econometrica, Econometric Society, vol. 62(2), pages 283-322, March.
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    More about this item

    Keywords

    Ambiguity aversion; Asset pricing; Robust mean–variance preferences;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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