Abstract
Let us now turn to what, in the eyes of the investor, is probably the main raison d’être of investment, namely, profitability. In focusing on risk in our first chapter, by no means do we belittle this all-important function of investment. Our discussion of risk simply serves to emphasize that, in arriving at an investment decision, the risk of the investment has to be weighed against its profitability. Thus, both profitability and risk have to be incorporated in the decision making process. We devote this chapter to the expected utility criterion that takes into account the whole distribution of returns (risk and return).
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
Notes
See F.P. Ramsey, “Truth and Probability,” in The Foundations of Mathematics and Other Logical Essays, London: K. Paul, Trench, Trusner and Co., 1931.
See also, J.M. Keynes, Essays in Biography, London: Rupert Hart-Davis, 1951.
See J. von Neumann and O. Morgenstern, Theory of Games and Economic Behavior, Princeton, N.J.: Princeton University Press, 3rd ed., 1953.
Author information
Authors and Affiliations
Rights and permissions
Copyright information
© 1998 Springer Science+Business Media New York
About this chapter
Cite this chapter
Levy, H. (1998). Expected Utility Theory. In: Stochastic Dominance. Studies in Risk and Uncertainty, vol 12. Springer, Boston, MA. https://doi.org/10.1007/978-1-4757-2840-8_2
Download citation
DOI: https://doi.org/10.1007/978-1-4757-2840-8_2
Publisher Name: Springer, Boston, MA
Print ISBN: 978-1-4757-2842-2
Online ISBN: 978-1-4757-2840-8
eBook Packages: Springer Book Archive