Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/18746
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dc.contributor.authorGollier, Christianen_US
dc.date.accessioned2009-01-28T15:52:35Z-
dc.date.available2009-01-28T15:52:35Z-
dc.date.issued2005en_US
dc.identifier.urihttp://hdl.handle.net/10419/18746-
dc.description.abstractWe examine a static one-risk-free-one-risky asset portfolio choice when the investor's wellbeing is affected by the anticipatory feelings associated to potential capital gains and losses. These feelings can be manipulated by the choice of subjective beliefs on the distribution of returns. However, the bias of these endogenous subjective beliefs induces the choice of a portfolio that is suboptimal with respect to the objective expected utility of final wealth. We characterize the structure of these optimal beliefs. We first show that optimal subjective beliefs must be degenerated with only two possible returns. Moreover, under some weak conditions on the utility function, these two atoms are at the lower and upper bounds of the objectively feasible returns. When the intensity of anticipatory feelings is small, the formation of beliefs must be biased in favor of optimism, which implies an increase in the equilibriumdemand for the risky asset. We also show that the optimal beliefs are approximately independent of the investor's degree of risk aversion.en_US
dc.language.isoengen_US
dc.publisher|aCenter for Economic Studies and Ifo Institute (CESifo) |cMunichen_US
dc.relation.ispartofseries|aCESifo Working Paper |x1382en_US
dc.subject.jelD81en_US
dc.subject.ddc330en_US
dc.subject.keywordanticipatory feelingsen_US
dc.subject.keywordportfolio choiceen_US
dc.subject.keywordoverconfidenceen_US
dc.subject.keywordpositive thinkingen_US
dc.subject.keywordendogenous beliefsen_US
dc.subject.stwAnlageverhaltenen_US
dc.subject.stwPortfolio-Managementen_US
dc.subject.stwEmotionen_US
dc.subject.stwErwartungstheorieen_US
dc.subject.stwScheingewinnen_US
dc.subject.stwBiasen_US
dc.subject.stwTheorieen_US
dc.titleOptimal illusions and decisions under risken_US
dc.typeWorking Paperen_US
dc.identifier.ppn479119465en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungen-

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