2019
DOI: 10.4236/tel.2019.94042
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Hedge Fund Investing or Mutual Fund Investing: An Application of Multi-Attribute Utility Theory

Abstract: This paper contrasts high-risk, hedge fund trading, with low-risk, mutual fund trading, in terms of their differing utility functions. We envision hedge funds, led by informed traders who use information to seek out investment opportunities, timing market conditions, with the expectation that prices will move in their favor. Directional hedge funds act to influence prices, while non-directional hedge funds do not act to influence prices. We present utility functions based on steeply-sloping Laplace distributio… Show more

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Cited by 1 publication
(1 citation statement)
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“…Future research must create theoretical formulations for litecoin and peercoin, which are lesser-known cryptocurrencies. Abraham (2019) suggested the creation of a new measure of risk-aversion to replace the Arrow-Pratt measure, which is over fifty years old. This may result in a 5-scale classification of risk-aversion, risk avoider, risk-averse, moderate risk-taker, somewhat moderate risk-taker, and risk-taker.…”
Section: Discussionmentioning
confidence: 99%
“…Future research must create theoretical formulations for litecoin and peercoin, which are lesser-known cryptocurrencies. Abraham (2019) suggested the creation of a new measure of risk-aversion to replace the Arrow-Pratt measure, which is over fifty years old. This may result in a 5-scale classification of risk-aversion, risk avoider, risk-averse, moderate risk-taker, somewhat moderate risk-taker, and risk-taker.…”
Section: Discussionmentioning
confidence: 99%