Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/297905 
Authors: 
Year of Publication: 
2021
Citation: 
[Journal:] European Financial and Accounting Journal [ISSN:] 1805-4846 [Volume:] 16 [Issue:] 2 [Year:] 2021 [Pages:] 51-72
Publisher: 
Prague University of Economics and Business, Faculty of Finance and Accounting, Prague
Abstract: 
Although the link between risk aversion and diminishing marginal utility of wealth is academically well established, theoretical discussions concerning its empirical validity remain. The presented, review-type paper aims to briefly examine theoretical roots responsible for the different views on this association in order to provide a broader perspective to alternative explanations. This latter task is assisted by comparative analysis of two recent pieces of research by Rick Falkenstein and Matthew Rabin; a duo of papers, handpicked at the author's discretion to demonstrate the convergence of alternative ideas from different authors (and backgrounds). In support of its argumentation, the paper also presents a critical overview of the equity premium puzzle as seen through the prism of behavioural finance. The main contributions of the paper include evidence-based support for the concept of relative utility and reconfirmation of the meaningful role of behavioural finance in economics and finance.
Subjects: 
Risk Aversion
Marginal Utility
Expected Utility
Behavioural Finance
Equity Premium Puzzle
JEL: 
D81
G11
G12
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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