《行为金融学入门》井泽教授Lecture 1 Rationality

1、2021/9/111From the view point of the Expected Utility TheoryBehavioral Finance2021/9/112Outline1-1. Rationality in Economic Theory1-2. Rationality without Uncertainty: Homo Economics2-1. Rationality under Uncertainty: Expected Utility Theory2-2. Irrationality under Uncertainty3-1. Axiomatic systems

2、of the Expected Utility Theory3-2. Experimental Tests of the Expected Utility Theory4-1. Risk preference and Certainty Equivalent4-2. How to Measure Risk Preference: BDM Method5-1. Subjective Probability in the Expected Utility Theory5-2. Elicitation of Subjective Probability6-1. Portfolio Selection

3、 Theory6-2. Portfolio Selection and Non-Expected Theory2021/9/113OUTLINEAre we rational as economists presume?Is your decision making different, under or without uncertainty?“Greed is good,” yelled Michael Douglas in the movie Wall Street (1987). But, are we really so greed, and selfish?2021/9/114In

4、struction of the gameResponderProposerPerfect strangers$5 is given to bothHow much do you take from $5?The rest of $5Do you accept?If yes, then the proposal will be realized.If no, then both will get nothing.2021/9/115The Ultimatum GameYou Get $（A-B）The Other Get$BThe Other Anonymous Both Get Nothin

5、gDecide $B$ArejectacceptIf you and the other subject are rational,you should give the minimum amount (say,1 cent), and the other should accept it.2021/9/116Gamblers fallacyHeads？ or Tails？Now Lets Play！2021/9/117万円万円万円万円万円万円万円万円万円万円万円万円万円万円万円Do you understand the fairness?2021/9/118Random Walk2021/9

6、/119“Fair” means “unpredictable for anyone”.2021/9/1110The Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel 2002Daniel Kahneman Vernon L. Smith 2021/9/1111Lessons from the gamesMan cannot live by money alone. We have the sense offairness.We live in the mixture of altruism and self

7、-interest.Cognitive ability of risk and uncertainty is bounded.We can be inconsistent in the perceprion of risk und uncertainty.2021/9/1112superstructurePERSON &SOCIRTYECONOMIC SYSTEMbase structureConventional view of economics2021/9/1113Behavioral ApproachPERSON &SOCIRTYECONOMIC SYSTEM2021/9/1114AN

8、DWe are not computers.2021/9/1115What is “rational”?Do you want the more money?Do you want only the more money?You have interest in money.You have not interest only in money.You have interest in money.You have interest only in money.Issue of choice among axioms (systems of presumptions)consistentcon

9、sistent2021/9/1116RationalityA axiom (system of presumption) must be consistent.Decision making must obey on the axiom.“Rationality does not say that the individuals actual goals are rational in some larger ethical, social, or human sense.AxiomChoiceAxiomChoiceunobservableobservableRational choice(p

10、redictable)Law of economicsstateOne-to-one2021/9/1117合理的2021/9/1118Friedman, M., 1953. Essays in Positive Economics. The University of Chicago PressWith regard to this matter, Friedmans as-if hypothesis (Friedman, 1953) may provide great help. He asserts that a theory is useful when its objects beha

11、ve as if they follow the theory. He explains this assertion by providing the example of the law of falling bodies in physics. The distance traveled by a falling body, s (in feet), in any specified time, t (in seconds), is given by the well-known formula: s =gt2, where g is the acceleration of a body

12、 dropped in a vacuum, which is constant. Since g is a value under a vacuum, the formula assumes a vacuum. However, in the actual atmosphere, bodiesfall as if the formula were valid. With regard to this aspect, he provides thefollowing explanation. under a wide range of circumstances, bodies that fal

13、l in theactual atmosphere behave as if they were falling in a vacuum. The formula is accepted because it works, not because we live inan approximate vacuum whatever that means.Friedmans as-if hypothesis 2021/9/1119Choice of rulesAxiomAxiomChoiceNot rational, but still may remain predictable.state202

14、1/9/1120Rationalitywithout Uncertainty 2021/9/1121Homo Economicus and Real PeopleHomo Economicus(Traditional Economics )Real People(Behavioral Economics)Maximize their own utilityBounded self-interest.Most people care, or act as if theycare, about others, even strangers, in some circumstances.Stable

15、 set of preferences (consistency)Bounded willpowerhuman beings often take actions that they know to be in conflict with their own long-term interestsPerfect computation, and utilize information perfectly.Consistent assessment.Bounded rationalityhuman cognitive abilities are not infinite.We have limi

16、ted computational skills and seriously flawed memories.The assumption of Homo economicus can and should be simply a preliminary step on the road to a more sophisticated model.2021/9/1122Homo economicusWell-being is defined by the utility functionMaximizes the utility function, given perceived opport

17、unities. Homo economicus tries to attain very specific and predetermined goals at minimal cost. For alternatives a, b S choice setu(a) u(b) a b where shows preference order.2021/9/1123Axioms of preference orderIf the set of alternatives, S, is not finite and non-countable, then additional axioms are

18、 required for a utility function to exist: (1) The relation is reflexive: a a (2) The relation is transitive: a b and b c then a c. (3) The relation is complete: for all a and b in S, a b or b a or both. (4) The relation is continuous (if S is a topological space, then for each point x in S, the set of points that are strictly preferred to x and the set of points that x is strictly preferred to are both open).NOTICE:(i) Together with reflexivity this means it is a preorder (ii) Completeness implies reflexivity. (iii) Continuity implies no-satiation.xyy