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Asset ManagementA Systematic Approach to Factor Investing$
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Andrew Ang

Print publication date: 2014

Print ISBN-13: 9780199959327

Published to Oxford Scholarship Online: August 2014

DOI: 10.1093/acprof:oso/9780199959327.001.0001

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PRINTED FROM OXFORD SCHOLARSHIP ONLINE (oxford.universitypressscholarship.com). (c) Copyright Oxford University Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in OSO for personal use. date: 20 September 2021



(p.35) Chapter 2 Preferences
Asset Management

Andrew Ang

Oxford University Press

Investors generally dislike the risk of losses during bad times. Optimal portfolio choice trades off these risks with the potential of returns. While mean-variance utility treats gains and losses symmetrically, other models of preferences allow investors to seek safety first, to weight the pain of losses more heavily than the benefit of gains, and to have their utility depend on their past consumption (habit) and the returns or actions of other investors.

Keywords:   utility, risk aversion, certainty equivalent, mean-variance, indifference curve, capital allocation line, CRRA, habit, loss aversion, short volatility

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