Title: On the Characterisation of Investor Preferences by Changes in Wealth
Authors: Christian S. Pedersen  and Steve E. Satchell, University of Cambridge
Date: 1999
Status: working paper

Traditional risk concepts have created links between specific partial orderings of gambles and the shape of investors utility functions, independently of initial wealth.  However, when we want to consider complete orderings of gambles with respect to a specific utility function, wealth cannot be ignored.  Bell (1988, 1995a and 1995b) has addressed this difficult question and characterised the specific functional form of utility functions which allow a finite number of switches between two arbitrary gambles over the entire range of initial wealth.  Extending this analysis, the authors characterise a large set of utility functions with respect to their switching characteristics.

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