Aggregate investor preferences and beliefs: A comment

Thierry Post, Miloš Kopa

Research output: Contribution to journalArticle

Abstract

A recent study in this journal presents encouraging results of a daunting simulation analysis of the statistical properties of a centered bootstrap approach to stochastic dominance efficiency analysis. However, by relying on the first-order optimality condition in a situation where multiple optima may occur, the empirical analysis draws the questionable conclusion that some of the toughest data sets in empirical asset pricing can be rationalized by the representative investor maximizing an S-shaped utility function, consistent with the so-called Prospect Stochastic Dominance criterion. Further research could be directed to developing global optimization algorithms and consistent re-sampling methods for statistical inference for general risky choice problems.

Original languageEnglish
Pages (from-to)187-190
Number of pages4
JournalJournal of Empirical Finance
Volume23
DOIs
Publication statusPublished - Sep 1 2013

Keywords

  • Asset pricing
  • Linear programming
  • Market portfolio efficiency
  • Risk aversion
  • Stochastic dominance
  • Utility theory

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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