The Utility of Wealth in an Upper and Lower Partial Moment Fabric
Forthcoming, Journal of Investing 2011
Posted: 28 Jan 2010 Last revised: 7 Sep 2010
Date Written: January 27, 2010
Utility should be a function consisting of two autonomous sections both positive and negative, that needs to be configurable to the individuals it is designed to represent. This is achieved through the target by which individuals measure their investments against as well as their individual interpretations of target variances. Historical utility functions tend to generalize these distinctions in order to apply them to a broader scope of the population and project a descriptive theory. Instead of the observed fitting the function, we have the function fit the observed in an effort to combine descriptive and normative techniques.
Keywords: Utility, Loss Aversion, Gain Seeking, Lower Partial Moment, Upper Partial Moment, Singularity, Specification Error
JEL Classification: D1
Suggested Citation: Suggested Citation