A Penny Saved Is Two Pennies Earned

2 Pages Posted: 3 May 2018 Last revised: 10 Jul 2019

Date Written: April 16, 2018

Abstract

Benjamin Franklin's original maxim found in Poor Richard's Almanac was actually "A penny saved is two pence clear" rather than the more commonly known "A penny saved is a penny earned." We believe he was getting at the notion that one risk-free penny is worth two pennies of expected but uncertain income, a result born out by modern mathematical advances in the theory of financial decision-making under uncertainty.

Keywords: Decision Making under Uncertainty, Risk, Utility, Risk Aversion, Coin Flip, Heuristics, Rules of Thumb, Market Timing, Gambling, Betting, Manager Selection, Sharpe Ratio, Mutual Funds, Data Mining, Fees

JEL Classification: B12, B16, B20, C00, C10, C11, C50, C57, C73, D03, D81, D83, E00, G00, G02, G11, G12, G14, G17, G23

Suggested Citation

White, James and Haghani, Victor, A Penny Saved Is Two Pennies Earned (April 16, 2018). Available at SSRN: https://ssrn.com/abstract=3163746 or http://dx.doi.org/10.2139/ssrn.3163746

James White (Contact Author)

Elm Partners ( email )

1630 Willow View Drive
PO Box 1417
Wilson, WY 83014

Victor Haghani

Elm Partners ( email )

1630 Willow View Drive
PO Box 1417
Wilson, WY 83014

HOME PAGE: http://www.elmfunds.com

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