行为金融学1课后习题答案.docVIP

PAGE 3 | Page PAGE ?2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly available website, in whole or in part. CHAPTER 1: Discussion Questions and Problems 1. Differentiate the following terms/concepts: Prospect and probability distribution A prospect is a lottery or series of wealth outcomes, each of which is associated with a probability, whereas a probability distribution defines the likelihood of possible outcomes. Risk and uncertainty Risk is measurable using probability, but uncertainty is not. Uncertainty is when probabilities can’t be assigned or the possible outcomes are unclear. Utility function and expected utility A utility function, denoted as u(?), assigns numbers to possible outcomes so that preferred choices receive higher numbers. Utility can be thought of as the satisfaction received from a particular outcome. Risk aversion, risk seeking, and risk neutrality Risk aversion describes someone who prefers the expected value of a lottery to the lottery itself. Risk seeking describes someone who prefers a lottery to the expected value of a lottery. And risk neutrality describes someone whose utility of the expected value of a lottery is equal to the expected utility of the lottery. 2. When eating out, Rory prefers spaghetti over a hamburger. Last night she had a choice of spaghetti and macaroni and cheese and decided on the spaghetti again. The night before, Rory had a choice between spaghetti, pizza, and a hamburger and this time she had pizza. Then, today she chose macaroni and cheese over a hamburger. Does her selection today indicate that Rory’s choices are consistent with economic rationality? Why or why not? Rory’s preferences are consistent with rationality. They are complete and transitive. We see that her preference ordering is: Pizza spaghetti macaroni and cheese hamburger 3. Consider a person with the following utility function over wealth: u(w)