Keynesian Utilities: Bulls and Bears

21 Pages Posted: 5 Apr 2013

See all articles by Anat Bracha

Anat Bracha

The Hebrew University

Donald Brown

Yale University - Cowles Foundation

Date Written: April 3, 2013


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.

Keywords: Uncertainty, Optimism, Afriat inequalities

JEL Classification: D81, G02, G11

Suggested Citation

Bracha, Anat and Brown, Donald J., Keynesian Utilities: Bulls and Bears (April 3, 2013). Cowles Foundation Discussion Paper No. 1891, Available at SSRN: or

Anat Bracha

The Hebrew University ( email )


Donald J. Brown (Contact Author)

Yale University - Cowles Foundation ( email )

Box 208281
New Haven, CT 06520-8281
United States

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