Axiomatic Foundations of Multiplier Preferences

By Tomasz Strzalecki. 2009

308 citations recorded by the source corpus.

This paper axiomatizes the robust control criterion of multiplier preferences introduced by Hansen and Sargent (2001). The axiomatization relates multiplier preferences to other classes of preferences studied in decision theory. Some properties of multiplier preferences are generalized to the broader class of variational preferences, recently introduced by Maccheroni, Marinacci and Rustichini (2006). The paper also establishes a link between the parameters of the multiplier criterion and the observable behavior of the agent. This link enables measurement of the parameters on the basis of observable choice data and provides a useful tool for applications.

Subfields: Economics and Econometrics, General Decision Sciences

View Paper: https://www.semanticscholar.org/paper/d0bc88745d70bdc2411a7618362fa7be13ae19ac

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Citations in the corpus

Ambiguity and Asset Markets (2010, background): “This functional form was introduced into economics by Anderson et al. (2003), who were inspired by robust-control theory, and it was axiomatized by Strzalecki (2010).”
Vector Expected Utility and Attitudes Toward Variation (2008, background): “An interesting axiomatization has recently been provided by Strzalecki [59]; see also Wang [61].”
Ambiguity in asset pricing and portfolio choice: a review of the literature (2010, unknown): “In reality, the mean μ is not perfectly revealed to an econometrician or perhaps even to investors, that instead might be able to estimate an alternative mean μ̂ The two Sharpe ratios (associated to μ and μ̂) are related as follows: £ (μ̂− μ)0Σ−1(μ̂− μ)¤12 − £(μ− ι )0Σ−1(μ− ι )0¤12 ≤ £(μ̂− ι”
Updating Ambiguity Averse Preferences (2009, background): “Similarly, if one thinks it appropriate or useful to further restrict to multiplier preferences (i.e., to obey the axioms in Strzalecki [2008]), then an update rule de…ned on and generating only multiplier preferences will be of interest .”
Subjective Beliefs and ex ante Trade (2008, unknown): “Strzalecki (2007) obtains an axiomatization of multiplier preferences along these lines.”
Risk Preferences and the Macroeconomic Announcement Premium (2018, methodology): “The above two conditions are the same as Conditions 1 and 2 in Strzalecki (2013). Intuitively, they require that the Arrow-Pratt coefficient of the function φ does not vary too much.”
Ambiguity Aversion: Implications for the Uncovered Interest Rate Parity Puzzle (2012, background): “For a discussion on how to recover in general ambiguity aversion from experiments see Strzalecki (2007). For a GMM estimation of the ambiguity aversion parameter for the multiplier preferences see Benigno and Nistico (2009) and Kleshchelski and Vincent (2007).”
Filling in the blanks: network structure and interbank contagion (2014, background): “5See also Mattsson and Weibull (2002) and Strzalecki (2011).”
Smooth Ambiguity Aversion toward Small Risks and Continuous-Time Recursive Utility (2013, background): “Strzalecki (2009) follows a closely related approach to characterize entropic preferences in the MMR setting.”
The fundamental risk quadrangle in risk management, optimization and statistical estimation (2013, background): “For that literature, see [46,47], and their references.”
A simplified axiomatic approach to ambiguity aversion (2010, background): “Finally, Strzalecki (2009) shows that the intersection of SOEU preferences with MEU preferences is precisely the set of SEU preferences.”