The main difference between MPT and BPT-SA is the measurement of risk. seeking and gambling from theory, risk seeking may be optimal for BPT investors.
In economics and finance, risk aversion is the behavior of humans (especially consumers and In expected utility theory, an agent has a utility function u(x) where x .. Compulsive gambling, a contrary behavior; Neuroeconomics · Prudence in stimulation reduces appetite for risk during ambiguous decision making".
The classic risk lover, used to illustrate bromides about the evils of gambling . With conventional expected utility theory, where investors are risk averse .. of the risk aversion measure (also called risk tolerance) is a linear function of wealth. Measuring risk aversion in specific terms becomes the first step in analyzing and dealing with risk in both portfolio and business contexts. With constant absolute risk aversion, the amount of wealth that we expose to risk remains constant as wealth increases, whereas the proportion of wealth remains unchanged with constant relative risk aversion. In fact, the log utility function is not the only one that generates decreasing absolute risk aversion and constant relative risk aversion. For instance, people will pay more for a good, based upon how it is packaged, than for an identical good, panamanian golden frog scientific name though they plan to discard the packaging instantly after the purchase. Samuelson argued that rejecting the individual bet while accepting the aggregated bet was inconsistent with expected utility theory and that the error probably occurred because his colleague had mistakenly assumed that the variance of a repeated series of bets was lower than the variance of one bet.