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Ola Mahmoud
Title
Prof. Dr.
Last Name
Mahmoud
First name
Ola
Email
ola.mahmoud@unisg.ch
Phone
+41 71 224 2351
Now showing
1 - 8 of 8
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PublicationType: journal articleJournal: Economics Letters
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PublicationThe Willingness to Pay for DiversificationDiversification is a fundamental concept in economics and finance. This paper argues that decision makers have an intrinsic preference for diversification that is responsive to cost, and that this willingness to pay for diversification is driven by risk aversion and loss aversion. In an experiment replicating a portfolio choice problem, the value of diversification is estimated to be at 5% of the initial endowment of approximately USD 100. Moreover, risk averse and loss averse individuals are willing to pay more for diversification. These findings point to the idea that diversification is a fundamental preference and may help explain portfolio choice anomalies such as irrational diversification, the diversification bias, and overdiversification.Type: journal articleJournal: Management Science
Scopus© Citations 1 -
PublicationOn the Consistency of ChoiceConsistency of choice is a fundamental and recurring theme in decision theory, social choice theory, behavioral economics, and psychological sciences. The purpose of this paper is to study consistency of choice independent of the particular decision model at hand. Consistency is viewed as an inherently logical concept that is fundamentally void of connotation and is thus disentangled from traditional rationality or consistency conditions imposed on decision models. The proposed formalization of consistency takes two forms: internal consistency, which refers to the property that a choice model does not generate contradictory statements; and semantic consistency, which refers to the idea that a theory's predictions are valid with respect to some observed data. In addressing semantic consistency, the relationship between theory and data is analyzed in terms of so-called duality mappings, which allow a passage between the two universes in a way that consistency is preserved. The formalization of consistency concepts relies on adapting revealed preference theory to the context-dependent setting. The paper concludes by discussing the implications of the proposed framework and how it relates to classical revealed preference theory and other formalizations of the relationship between the theory and reality of choice.Type: journal articleJournal: Theory and decision : an international journal for multidisciplinary advances in decision scienceVolume: 83Issue: 4
Scopus© Citations 3 -
PublicationType: journal articleJournal: Journal of risk : JORVolume: 19Issue: 3
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PublicationDrawdown: From Practice to Theory and Back AgainMaximum drawdown, the largest cumulative loss from peak to trough, is one of the most widely used indicators of risk in the fund management industry, but one of the least developed in the context of measures of risk. We formalize drawdown risk as Conditional Expected Drawdown (CED), which is the tail mean of maximum drawdown distributions. We show that CED is a degree one positive homogenous risk measure, so that it can be linearly attributed to factors; and convex, so that it can be used in quantitative optimization. We empirically explore the differences in risk attributions based on CED, Expected Shortfall (ES) and volatility. An important feature of CED is its sensitivity to serial correlation. In an empirical study that fits AR(1) models to US Equity and US Bonds, we find substantially higher correlation between the autoregressive parameter and CED than with ES or with volatility.Type: journal articleJournal: Mathematics and Financial EconomicsVolume: 11Issue: 3
Scopus© Citations 30 -
PublicationDiversification Preferences in the Theory of ChoiceDiversification represents the idea of choosing variety over uniformity. Within the theory of choice, desirability of diversification is axiomatized as preference for a convex combination of choices that are equivalently ranked. This corresponds to the notion of risk aversion when one assumes the von Neumann–Morgenstern expected utility model, but the equivalence fails to hold in other models. This paper analyzes axiomatizations of the concept of diversification and their relationship to the related notions of risk aversion and convex preferences within different choice theoretic models. Implications of these notions on portfolio choice are discussed. We cover model-independent diversification preferences, preferences within models of choice under risk, including expected utility theory and the more general rank-dependent expected utility theory, as well as models of choice under uncertainty axiomatized via Choquet expected utility theory. Remarks on interpretations of diversification preferences within models of behavioral choice are given in the conclusion.Type: journal articleJournal: Decisions in economics and finance : a journal of applied mathematicsVolume: 39Issue: 2
Scopus© Citations 7 -
PublicationType: journal articleJournal: Journal of Investment StrategiesVolume: 2Issue: 2
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PublicationType: journal articleJournal: Quantitative FinanceVolume: 13Issue: 10