Ordinal utility of moments: foundations and financial behavior


After Tobin (1958), a considerable effort has been devoted to connecting the expected utility approach to a utility function directly expressed in terms of moments. We follow the alternative route of providing, for the first time, the theoretical, autonomous foundation of an ordinal utility function of moments, representing rational choices under uncertainty, free of any ‘independence axiom’ and compatible with all the behavioral “paradoxes” documented in the economic literature.

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Keywords: mean-variance utility; expected utility; behavioral paradoxes

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