Asset Demand Based Tests of Expected Utility Maximization
Abstract
We provide conditions under which contingent claim and asset demands are consistent with state independent Expected Utility maximization. The paper focuses on the case of a single commodity and demands are allowed to be functions of probabilities and not just prices and income. We extend prior analyses by deriving three distinct tests for demands to be rationalized by Expected Utility: (i) a contingent claim analogue to the certainty strong axiom of revealed preference, (ii) a characterization of the functional form for demand, and (iii) necessary and sufficient conditions based on the Slutsky matrix.
Download PDF
Citation
Kubler, Felix, Larry Selden, and Xiao Wei. "Asset Demand Based Tests of Expected Utility Maximization." American Economic Review 104, no. 11 (2014): 3459-3480.
Each author name for a Columbia Business School faculty member is linked to a faculty research page, which lists additional publications by that faculty member.
Each topic is linked to an index of publications on that topic.