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Benchmark values for higher order coefficients of relative risk aversion

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Denuit, Michel [UCL] Rey, Béatrice [Université de Lyon]

The existing literature on savings, insurance, and portfolio choices under risk has revealed that quite often comparative statics results depend, among other things, upon the values of the coefficients of relative risk aversion and relative prudence. More specifically the benchmark values for these coefficients are, respectively, one and two. Recently, several papers investigated constraints on the higher degree extensions of the coefficients of relative risk aversion and of relative prudence. The present work provides a unified approach to this question based on the concept of elementary correlation increasing transformations, allowing for a better understanding of changes in risk in the multiplicative case.

Document type Article de périodique (Journal article) – Article de recherche
Access type Accès restreint
Publication date 2014
Language Anglais
Journal information "Theory and Decision : an international journal for multidisciplinary advances in decision sciences" - Vol. 76, no. 1, p. 81-94 (2014)
Peer reviewed yes
Publisher Springer New York LLC ((United States) New York)
issn 0040-5833
e-issn 1573-7187
Publication status Publié
Affiliation UCL - SSH/LIDAM/ISBA - Institut de Statistique, Biostatistique et Sciences Actuarielles
Keywords Expected utility ; Higher order relative risk aversion ; Higher order multiplicative risk ; apportionment ; Wealth effect ; Stochastic dominance
Links
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Bibliographic reference Denuit, Michel ; Rey, Béatrice. Benchmark values for higher order coefficients of relative risk aversion. In: Theory and Decision : an international journal for multidisciplinary advances in decision sciences, Vol. 76, no. 1, p. 81-94 (2014)
Permanent URL http://hdl.handle.net/2078.1/139529