Keynesian Utilities: Bulls and Bears
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.
Bracha, Anat and Brown, Donald J., "Keynesian Utilities: Bulls and Bears" (2013). Cowles Foundation Discussion Papers. 2264.