Paper by Dennis Jansen and Liqun Liu Published in Decisions in Economics and Finance

Sep 10, 2021
Summary: The paper by Director Dennis Jansen and Research Scientist Liqun Liu, "Portfolio Choice in the Model of Expected Utility with a Safety-First Component," has been published in the journal Decisions in Economics and Finance
 
The paper discusses risk levels associated with investment. Whereas the majority of economists interpret risk as dispersion or variation in an outcome variable, many everyday decision makers tend to associate risk with the outcome failing to meet a certain “safety” level. In this model, a decision maker’s concern about the final wealth distribution per se is captured by the expected utility of the final wealth, and his concern about meeting a safety wealth level is captured by the probability of final wealth exceeding the safety level.
 
Read the full working paper in the PERC media libraries
 
The online edition of the journal publication can be found here.