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The informational content of the shape of utility functions: financial strategic behavior
Author(s) -
Pennings Joost M.E.,
Garcia Philip
Publication year - 2009
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.1439
Subject(s) - function (biology) , context (archaeology) , order (exchange) , portfolio , microeconomics , asset allocation , economics , expected utility hypothesis , asset (computer security) , strategic planning , finance , business , financial economics , computer science , management , paleontology , computer security , evolutionary biology , biology
Recently, Pennings and Smidts (2003) showed a relationship between organizational behavior and the global shape of the utility function. Their results suggest that the shape of the utility function may be related to ‘higher‐order’ decisions. This research examines the relationship between financial strategic decisions and the global shape of the utility function of real decision makers. We assess the shape of utility functions of portfolio managers and show that the global shape is related to their strategic asset allocation. The findings demonstrate the informational content of the shape of utility functions in the context of financial strategic behavior. Copyright © 2008 John Wiley & Sons, Ltd.