Nomura Lecture
|
Tue, 20/05/2008 16:00 |
Professor Xunyu Zhou (Oxford) |
Nomura Lecture  |
Martin Wood Lecture |
| The classical expected utility maximisation theory for financial asset allocation is premised on the assumption that human beings when facing risk make rational choices. The theory has been challenged by many observed and repeatable empirical patterns as well as a number of famous paradoxes and puzzles. The prospect theory in behavioural finance use cognitive psychological techniques to incorporate anomalies in human judgement into economic decision making. This lecture explains the interplay between risk and human judgement, and its impact on dynamic asset allocation via mathematically establishing and analysing a behavioural portfolio choice model. | |||
|
Tue, 20/05/2008 17:30 |
Professor Harry M. Markowitz |
Nomura Lecture |
Martin Wood Lecture |
| “The Utility of Wealth,”, Markowitz's “other” 1952 paper, explains observed risk-seeking and risk-avoidance behaviour by a utility function which has deviation from customary wealth, rather than wealth itself, as its argument. It also assumes that utility is bounded above and below. This talk presents a class (GUW) of functions which generalise utility-of-wealth (UW) functions. Unlike the latter functions, the class is too broad to have interesting, verifiable implications. Rather, various subclasses have such implications. A recent paper by Gillen and Markowitz presents notations to specify various subclasses, and explores the properties of some of these. This talk extends this classification of risk-facing behaviour to non-utility-maximising behaviour as described by Allais and Ellsberg, and formalised by Mark Machina. | |||
