Recovery of preferences from observed wealth in a single realization

Philip H. Dybvig; L. C.G. Rogers

doi:10.1093/rfs/10.1.151

Recovery of preferences from observed wealth in a single realization

Philip H. Dybvig
, L. C.G. Rogers

Research output: Contribution to journal › Article › peer-review

20 Scopus citations

Abstract

Von Neumann-Morgensternpreferences over terminal consumption can be inferred from wealth on a single sample path when markets are complete and returns follow a known law in a neoclassical investment problem in either a discretetime i.i.d. binomial model or a continuous-time diffusion model with a Gaussian state variable. Numerical results suggest that useful information about preferences can be obtained from even a single noisy sample of monthly observations of a portfolio over 5 years.

Original language	English
Pages (from-to)	151-174
Number of pages	24
Journal	Review of Financial Studies
Volume	10
Issue number	1
DOIs	https://doi.org/10.1093/rfs/10.1.151
State	Published - 1997

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AB - Von Neumann-Morgensternpreferences over terminal consumption can be inferred from wealth on a single sample path when markets are complete and returns follow a known law in a neoclassical investment problem in either a discretetime i.i.d. binomial model or a continuous-time diffusion model with a Gaussian state variable. Numerical results suggest that useful information about preferences can be obtained from even a single noisy sample of monthly observations of a portfolio over 5 years.

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DO - 10.1093/rfs/10.1.151

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Recovery of preferences from observed wealth in a single realization

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