Research On The Asset Choice Behaviour Of Households Based On Certainty Preference

China’s reform and opening up and the tremendous economic success achieved as a result have,on the one hand,enabled Chinese households to completely escape from the poverty of the planned economy,the completion of a well-off society not only means the realization of the basic consumption freedom of each household,it also indicates that the inter-term choice has become increasingly important.The asset allocation caused by the inter-term choice has become a major economic problem faced by all households.On the other hand,the asset selection process of Chinese households has completely broken through the pattern of a single bank deposit,and a multi-layer asset market system has been formed.This has not only led to the complexity of the asset allocation process of households,but also brought about uncertainty and asymmetry in the information set in the asset selection of residents,and how to deal with this uncertainty and asymmetry in the known information set is not only a real problem in the asset selection process of households,but also a scientific problem in understanding and explaining some economic"anomalies".Along with the development of modern experimental economics,relevant experimental results show that,the market is not efficient,arbitrage has also not been as effective as mainstream financiers had predicted.The presence of noise traders and their role in the market may cause the asset prices to systematically deviate from their values in the long run,especially when the safety of the households’selectable asset attributes has heterogeneous characteristics and the households’evaluation of safety does not satisfy the linear rule,the analysis mode based on Markowitz’s Mean-Variance(M-V)model may not be consistent with the household asset selection criteria.Investors’ behavior is characterized by their preference for certainty when faced with uncertainty.This means that in practice,people are more likely to deal with uncertainty by concentrating their investment behaviour,which in turn deviates from the investment philosophy of a diversified portfolio.The value function theory proposed by behavioral financiers within the framework of prospect theory addresses the evaluation of total value by constructing probabilistic non-equally weighted weight functions,and mental account theory provides inspiration for resolving the conflict between centralised investment behaviour and the investment philosophy of a diversified portfolio through ideas such as the segmentation and combination of asset attributes.This dissertation attempts to explore the asset allocation options for different types of asset choice sets under the asymmetric information set of investors by taking certainty preference as the entry point and using it as the basis for non-equivalence assignment in value evaluation,and to give corresponding empirical evidence by means of empirical analysis using relevant data of residential households in China as a sample.Based on a systematic review of the relevant research literature,this dissertation discusses the principle of certainty preference in relation to human behavioral choices under an uncertainty background by examining classical experiments in experimental economics and some of the representative methods in statistics,and briefly introduces the certainty preference measurement methods by laying down the foundational prerequisites for studying the asset choices under the information asymmetry conditions of the actors.Under this prerequisite,the asset choice based on the certainty preference is focused on two levels by combining the relevant theories of behavioral finance.Firstly,based on the relationship between the asset attributes and certainty characteristics,the demand function for safe assets and its portfolio choice and the demand function for risk assets and the portfolio choice of residential households have been explored in the context of psychological account theory.As a result,a model of asset choice for households based on certainty preference has been proposed,and combined with an analysis of the relationship between certainty preference and the order of asset choice,the solution of the asset choice for households model based on certainty preference is discussed in the context of the"safety-first principle".This effectively overcomes the obstacles of the existing multipsychological account,involving the behavioral asset portfolio model solution.Secondly,in relation to the reality of asymmetrical information sets for investors,it is based on the principle of certainty preference under the framework of the Markowitz portfolio model.A portfolio model based on certainty preference is constructed by introducing non-linear certainty preference weights into the Markowitz portfolio model,and the solution of the model is explored.Use this as a baseline model,while taking into account the objective reality of credit trading in the securities market,we further explore a portfolio model of residential households" creditcontaining assets based on certainty preference and its solution.The work in this area not only makes up for the shortcomings of Markowitz portfolio model in terms of ignoring the reality of the asymmetric investor information sets,but also minimizes the risk of setting the expected distribution of the underlying securities and extends said model,and it also gives an insight into the heterogeneity of the investors’ securities portfolio choices,especially the concentrated investment behavior and the self-selection stock.This dissertation also provides a reasonable explanation of the heterogeneity of the investors’ portfolio choices,especially the common phenomena such as concentrated investment behavior and the self-selection stock setting.Finally,this dissertation provides empirical evidence of the conclusions of the above two theoretical analyses using the actual data of Chinese resident households as the sample.The basic conclusions from the full study are as follows:(1)The majority of the facts show IV that when people face uncertainty,there is an overall preference for certainty.The certainty preference implies that the probability-weighted expected value evaluation criterion is not suitable for the asset allocation choice.The maximum probability criterion,the greater likelihood estimation idea and other guaranteed criteria are more suitable for uncertainty choice.These criteria are consistent with the "safety-first principle" in the behavioral asset portfolio model.(2)Under the "safety-first principle",the household asset allocation exhibits an orderliness in terms of choice,while the spontaneous safe assets constitute the threshold of whether to allocate the risk assets,and the household safe assets demand function is a linear relationship consisting of both spontaneous and induced safe assets,while the demand function for risk assets is a non-linear relationship determined by the certainty preference,the expected return and risk,and the certainty preference that is assigned with a non-equivalent geometric scale in the value evaluation.(3)The asset allocation of residential households can be examined using one of two levels,one is the allocation of safe assets and risk assets,and the other is the portfolio of safe assets and the portfolio of risky assets.The portfolio of safe assets is fully determined by the known returns and availability of the underlying condition of the no availability barrier.The safe assets of the residential households will be concentrated on the assets with high returns,while the allocation of risk assets is consistent with the portfolio model of securities based on the certainty preference.(4)The "only way to go up is to stay up" under China’s annual house price yardstick has led to an"illusion of safe assets" in the asset allocation process for residential households.The "safe asset illusion" of real estate has led to a concentration of household asset allocation in real estate through income and substitution effects,resulting in a house price bubble on the one hand,and a lack of equity investment by households on the other.(5)In terms of the portfolio selection,investors have asymmetric information about the underlying securities.A risky portfolio model based on certainty preference can not only explains the heterogeneity of the residential households’equity investment behavior but,by extension,also correctly reveal the credit asset allocation choices.