Document Type
Discussion Paper
Publication Date
4-1-2013
CFDP Number
1891
CFDP Pages
20
Abstract
We propose Keynesian utilities as a new class of non-expected utility functions representing the preferences of investors for optimism, defined as the composition of the investor’s preferences for risk and her preferences for ambiguity. The optimism or pessimism of Keynesian utilities is determined by empirical proxies for risk and ambiguity. Bulls and bears are defined respectively as optimistic and pessimistic investors. The resulting family of Afriat inequalities are necessary and sufficient for rationalizing the asset demands of bulls and bears with Keynesian utilities.
Recommended Citation
Bracha, Anat and Brown, Donald J., "Keynesian Utilities: Bulls and Bears" (2013). Cowles Foundation Discussion Papers. 2264.
https://elischolar.library.yale.edu/cowles-discussion-paper-series/2264