Risk, Return, and Utility
Management Science · 1995 · Volume 41 · Issue 1
Abstract
Expected utility theory is widely acknowledged to be a rational approach to making decisions involving risk. Yet the methodology gives no explicit role to measures of risk and return. In this paper we identify those families of utility functions that are compatible with a risk-return interpretation. From these families we deduce utility-compatible measures of risk.
Keywords
risk, return, utility, investments
Enable JavaScript for citation tools and additional paper interactions.