Diversification Preferences in the Theory of Choice

Diversification represents the idea of choosing variety over uniformity. Within the theory of choice, desirability of diversification is axiomatized as preference for a convex combination of choices that are equivalently ranked. This corresponds to the notion of risk aversion when one assumes the von-Neumann-Morgenstern expected utility model, but the equivalence fails to hold in other models. This paper studies axiomatizations of the concept of diversification and their relationship to the related notions of risk aversion and convex preferences within different choice theoretic models. Implications of these notions on portfolio choice are discussed. We cover model-independent diversification preferences, preferences within models of choice under risk, including expected utility theory and the more general rank-dependent expected utility theory, as well as models of choice under uncertainty axiomatized via Choquet expected utility theory. Remarks on interpretations of diversification preferences within models of behavioral choice are given in the conclusion

Portfolio Selection with Narrow Framing: Probability Weighting Matters

This paper extends the model with narrow framing suggested by Barberis and Huang (2009) to also account for probability weighting and a convex-concave value function in the specification of cumulative prospect theory preferences on narrowly framed assets. We show that probability weighting is needed in order that investors reduce their holding of narrowly framed risky assets in the presence of negative skewness and high Sharpe ratios, which are typical characteristics of stock index returns. The model with framing and probability weighting can thus explain the stock participation puzzle under realistic assumptions on stock market returns. We also show that a convex-concave value function generates wealth effects that are consistent with empirical observations on stock market participation. Finally, we address the asset pricing implications of probability weighting in the model with narrow framing and show that in the case of negative skewness the equity premium of narrowly framed assets is much higher than when probability weighting is not taken into account.Narrow framing, cumulative prospect theory, probability weighting function,negative skewness, simulation methods

Loss aversion with a state-dependent reference point

This study investigates loss aversion when the reference point is a state-dependent random variable. This case describes, for example, a money manager being evaluated relative to a risky benchmark index rather than a fixed target return level. Using a state-dependent structure, prospects are more (less) attractive if they depend positively (negatively) on the reference point. In addition, the structure avoids an inherent aversion to risky prospects and yields no losses when the prospect and the reference point are the same. Related to this, the optimal reference-dependent solution equals the optimal consumption solution (no loss aversion) when the reference point is selected completely endogenously. Given that loss aversion is widespread, we conclude that the reference point generally includes an important exogenously fixed component. For example, the typical investment benchmark index is externally fixed by the investment principal for the duration of the investment mandate. We develop a choice model where adjustment costs cause stickiness relative to an initial exogenous reference point.Reference-dependent preferences, stochastic reference point, loss aversion, disappointment theory, regret theory.

Goal-Based Investing with Cumulative Prospect Theory and Satisficing Behavior

This paper presents a time-continuous goal-based portfolio selection model with cumulative prospect theory preferences and satisficing behavior, where investors optimally split their wealth among several investment goals at different horizons. The paper extends the model of Berkelaar, Kouwenberg and Post (2004) to account for multiple-goals. We show that when the discounted values of all target wealths is not too high relative to the initial wealth (i.e., goals are not too ambitious), investors mainly invest to reach short-term investment goals and adopt safe investment strategies for this purpose. However, when goals are very ambitious, they put a high proportion of their wealth in long-term goals and adopt aggressive investment strategies with high leverage to reach short-term goals and the overall investment strategy also displays high leverage. High incentives to reach ambitious shortterm goals (high target returns) and the consequent excessive leverage have been identified as causes for the global financial crisis erupted in 2008.behavioral finance, portfolio selection, mental accounting, narrow framing, cumulative prospect theory, satisficing, loss aversion, goal-based approach

A Satisficing Alternative to Prospect Theory

In this paper, we axiomatize a target-based model of choice that allows decision makers to be both risk averse and risk seeking, depending on the payoff's position relative to a prespecified target. The approach can be viewed as a hybrid model, capturing in spirit two celebrated ideas: first, the satisficing concept of Simon (1955); second, the switch between risk aversion and risk seeking popularized by the prospect theory of Kahneman and Tversky (1979). Our axioms are simple and intuitive; in order to be implemented in practice, our approach requires only the specification of an aspiration level. We show that this approach is dual to a known approach using risk measures, thereby allowing us to connect to existing theory. Though our approach is intended to be normative, we also show that it resolves the classical examples of Allais (1953) and Ellsberg (1961).satisficing; aspiration levels; targets; prospect theory; reflection effect; risk measures; coherent risk measures; convex risk measures; portfolio optimization

Dual representation of choice and aspirational preferences

We consider choice over a set of monetary acts (random variables) and study a general class of preferences. These preferences favor diversification, except perhaps on a subset of sufficiently disliked acts, over which concentration is instead preferred. This structure encompasses a number of known models in this setting. We show that such preferences can be expressed in dual form in terms of a family of measures of risk and a target function. Specifically, the choice function is equivalent to selection of a maximum index level such that the risk of beating the target function at that level is acceptable. This dual representation may help to uncover new models of choice. One that we explore in detail is the special case of a bounded target function. This case corresponds to a type of satisficing and has descriptive relevance. Moreover, the model results in optimization problems that may be efficiently solved in large-scale.

A Concave Security Market Line

We provide theoretical and empirical arguments in favor of a concave shape for the security market line, or a diminishing marginal premium for market risk. In capital market equilibrium with binding portfolio restrictions, different investors generally hold different sets of risky securities. Despite the differences in composition, the optimal portfolios generally share a joint exposure to systematic risk. Equilibrium in this case can be approximated by a concave relation between expected return and market beta rather than the traditional linear relation. An empirical analysis of U.S. stock market data confirms the existence of a significant and robust, concave cross-sectional relation between average return and estimated past market beta. We estimate that the market-risk premium is at least five to six percent per annum for the average stock, substantially higher than conventional estimates

Pattern of care and effectiveness of treatment for glioblastoma patients in the real world: Results from a prospective population-based registry. Could survival differ in a high-volume center?

BACKGROUND: As yet, no population-based prospective studies have been conducted to investigate the incidence and clinical outcome of glioblastoma (GBM) or the diffusion and impact of the current standard therapeutic approach in newly diagnosed patients younger than aged 70 years. METHODS: Data on all new cases of primary brain tumors observed from January 1, 2009, to December 31, 2010, in adults residing within the Emilia-Romagna region were recorded in a prospective registry in the Project of Emilia Romagna on Neuro-Oncology (PERNO). Based on the data from this registry, a prospective evaluation was made of the treatment efficacy and outcome in GBM patients. RESULTS: Two hundred sixty-seven GBM patients (median age, 64 y; range, 29-84 y) were enrolled. The median overall survival (OS) was 10.7 months (95% CI, 9.2-12.4). The 139 patients 64aged 70 years who were given standard temozolomide treatment concomitant with and adjuvant to radiotherapy had a median OS of 16.4 months (95% CI, 14.0-18.5). With multivariate analysis, OS correlated significantly with KPS (HR = 0.458; 95% CI, 0.248-0.847; P = .0127), MGMT methylation status (HR = 0.612; 95% CI, 0.388-0.966; P = .0350), and treatment received in a high versus low-volume center (HR = 0.56; 95% CI, 0.328-0.986; P = .0446). CONCLUSIONS: The median OS following standard temozolomide treatment concurrent with and adjuvant to radiotherapy given to (72.8% of) patients aged 6470 years is consistent with findings reported from randomized phase III trials. The volume and expertise of the treatment center should be further investigated as a prognostic factor

Contributi per una flora vascolare di Toscana. XI (664-738)

Vengono presentate nuove località e/o conferme relative 75 taxa specifici e sottospecifici di piante vascolari della flora vascolare toscana, appartenenti a 67 generi e 41 famiglie: Delosperma (Aizoaceae), Dysphania (Amaranthaceae), Leucojum, Nothoscordum (Amaryllidaceae), Bupleurum, Coriandrum (Apiaceae), Araujia (Apocynaceae), Lemna (Araceae), Hydrocotyle (Araliaceae), Aristolochia (Aristolochiaceae), Bellevalia (Asparagaceae), Asphodelus (Asphodelaceae), Artemisia, Crepis, Eclipta, Erigeron, Hieracium, Senecio, Symphyotrichum, Tolpis (Asteraceae), Symphytum (Boraginaceae), Alyssum, Cardamine, Eruca, Isatis (Brassicaceae), Valerianella (Caprifoliaceae), Petrorhagia, Scleranthus (Caryophyllaceae), Commelina (Commelinaceae), Dichondra (Convolvulaceae), Sedum (Crassulaceae), Diospyros (Ebenaceae), Moneses (Ericaceae), Euphorbia (Euphorbiaceae), Medicago, Trifolium (Fabaceae), Myriophyllum (Haloragaceae), Juncus (Juncaceae), Salvia, Teucrium (Lamiaceae), Broussonetia (Moraceae), Spiranthes (Orchidaceae), Phelipanche (Orobanchaceae), Papaver (Papaveraceae), Passiflora (Passifloraceae), Cedrus, Pseudotsuga (Pinaceae), Bromopsis, Calamagrostis, Cenchrus, Drymochloa, Melica, Oloptum, Phleum, Sporobolus, Tragus (Poaceae), Stuckenia (Potamogetonaceae), Lysimachia (Primulaceae), Anemone, Aquilegia (Ranunculaceae), Eriobotrya (Rosaceae), Crucianella (Rubiaceae), Verbascum (Scrophulariaceae), Typha (Typhaceae), Urtica (Urticaceae), Viola (Violaceae). Infine, viene discusso lo status di conservazione delle entità e gli eventuali vincoli di protezione dei biotopi segnalati.New localities and/or confirmations concerning 75 specific and subspecific plant taxa of Tuscan vascular flora, belonging to 67 genera and 41 families are presented: Delosperma (Aizoaceae), Dysphania (Amaranthaceae), Leucojum, Nothoscordum (Amaryllidaceae), Bupleurum, Coriandrum (Apiaceae), Araujia (Apocynaceae), Lemna (Araceae), Hydrocotyle (Araliaceae), Aristolochia (Aristolochiaceae), Bellevalia (Asparagaceae), Asphodelus (Asphodelaceae), Artemisia, Crepis, Eclipta, Erigeron, Hieracium, Senecio, Symphyotrichum, Tolpis (Asteraceae), Symphytum (Boraginaceae), Alyssum, Cardamine, Eruca, Isatis (Brassicaceae), Valerianella (Caprifoliaceae), Petrorhagia, Scleranthus (Caryophyllaceae), Commelina (Commelinaceae), Dichondra (Convolvulaceae), Sedum (Crassulaceae), Diospyros (Ebenaceae), Moneses (Ericaceae), Euphorbia (Euphorbiaceae), Medicago, Trifolium (Fabaceae), Myriophyllum (Haloragaceae), Juncus (Juncaceae), Salvia, Teucrium (Lamiaceae), Broussonetia (Moraceae), Spiranthes (Orchidaceae), Phelipanche (Orobanchaceae), Papaver (Papaveraceae), Passiflora (Passifloraceae), Cedrus, Pseudotsuga (Pinaceae), Bromopsis, Calamagrostis, Cenchrus, Drymochloa, Melica, Oloptum, Phleum, Sporobolus, Tragus (Poaceae), Stuckenia (Potamogetonaceae), Lysimachia (Primulaceae), Anemone, Aquilegia (Ranunculaceae), Eriobotrya (Rosaceae), Crucianella (Rubiaceae), Verbascum (Scrophulariaceae), Typha (Typhaceae), Urtica (Urticaceae), and Viola (Violaceae). In the end, the conservation status of the units and eventual protection of the cited biotopes are discussed