TY - JOUR
T1 - Preferences with frames: A new utility specification that allows for the framing of risks
AU - Barberis, Nicholas
AU - Huang, Ming
PY - 2009
Y1 - 2009
N2 - Experiments on decision-making show that, when people evaluate risk, they often engage in "narrow framing": that is, in contrast to the prediction of traditional utility functions defined over wealth or consumption, they often evaluate risks in isolation, separately from other risks they are already facing. While narrow framing has many potential real-world applications, there are almost no tractable preference specifications that incorporate it into the standard framework used by economists. In this paper, we propose such a specification and demonstrate its tractability in both portfolio choice and equilibrium settings.
AB - Experiments on decision-making show that, when people evaluate risk, they often engage in "narrow framing": that is, in contrast to the prediction of traditional utility functions defined over wealth or consumption, they often evaluate risks in isolation, separately from other risks they are already facing. While narrow framing has many potential real-world applications, there are almost no tractable preference specifications that incorporate it into the standard framework used by economists. In this paper, we propose such a specification and demonstrate its tractability in both portfolio choice and equilibrium settings.
KW - Diversification
KW - Equity premium
KW - Framing
KW - Stock market participation
KW - Diversification
KW - Equity premium
KW - Framing
KW - Stock market participation
UR - https://www.webofscience.com/api/gateway?GWVersion=2&SrcApp=ceibs_wosapi&SrcAuth=WosAPI&KeyUT=WOS:000267269500003&DestLinkType=FullRecord&DestApp=WOS
U2 - 10.1016/j.jedc.2009.01.009
DO - 10.1016/j.jedc.2009.01.009
M3 - Journal
SN - 0165-1889
VL - 33
SP - 1555
EP - 1576
JO - Journal of Economic Dynamics and Control
JF - Journal of Economic Dynamics and Control
IS - 8
ER -