Revisiting the Expected Utility Theory and the Consumption CAPM

Sapre, Nikhil (2021): Revisiting the Expected Utility Theory and the Consumption CAPM.

Abstract

The concept of utility is the core component of many foundational theories in social sciences. It has evolved from a philosophical belief that people seek happiness and satisfaction to a mathematically derived theory in economics and finance. Beginning with a brief review of the developments in the Expected Utility Theory (EUT) and its applicability in equity pricing, this paper includes a critical appraisal of relevant theoretical and empirical studies from the fields of financial economics and behavioural studies, with a particular focus on the the Consumption Capital Asset Pricing Model (CCAPM).

• Item Type: MPRA Paper
• Language: English
• Keywords: Expected Utility, Choice Behaviour, Equity Pricing, CCAPM
• Subjects: G - Financial Economics > G1 - General Financial Markets > G10 - General; G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions; G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing ; Trading Volume ; Bond Interest Rates

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