Advanced Search
MyIDEAS: Login to save this article or follow this journal

Relative risk aversion, relative prudence and comparative statics under uncertainty: The case of (μ, σ)-preferences

Contents:

Author Info

  • Thomas Eichner
  • Andreas Wagener

Abstract

From the expected-utility approach, relative risk aversion being smaller than one and relative prudence being smaller than two emerge as preference restrictions that fully determine the optimal responses of decisions under uncertainty to certain shifts in probability distributions. We characterize the magnitudes of relative risk aversion and relative prudence in terms of the two-parameter, mean-standard deviation approach. We demonstrate that this characterization is instrumental in obtaining comparative static results in the two-parameter setting. We further relate our findings to the results in the expected-utility framework. Copyright Blackwell Publishers Ltd and the Board of Trustees of the Bulletin of Economic Research, 2004.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.blackwell-synergy.com/servlet/useragent?func=synergy&synergyAction=showTOC&journalCode=boer&volume=56&issue=2&year=2004&part=null
File Function: link to full text
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Wiley Blackwell in its journal Bulletin of Economic Research.

Volume (Year): 56 (2004)
Issue (Month): 2 (04)
Pages: 159-170

as in new window
Handle: RePEc:bla:buecrs:v:56:y:2004:i:2:p:159-170

Contact details of provider:
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0307-3378

Order Information:
Web: http://www.blackwellpublishing.com/subs.asp?ref=0307-3378

Related research

Keywords:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Ormiston, Michael B. & Schlee, Edward E., 1992. "Necessary conditions for comparative statics under uncertainty," Economics Letters, Elsevier, Elsevier, vol. 40(4), pages 429-434, December.
  2. Wagener, Andreas, 2002. "Prudence and risk vulnerability in two-moment decision models," Economics Letters, Elsevier, Elsevier, vol. 74(2), pages 229-235, January.
  3. Hawawini, Gabriel, 1978. "A mean-standard deviation exposition of the theory of the firm under uncertainty," MPRA Paper 10148, University Library of Munich, Germany.
  4. Lajeri, Fatma & Nielsen, Lars Tyge, 1997. "Parametric Characterizations of Risk Aversion and Prudence," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1650, C.E.P.R. Discussion Papers.
  5. Ormiston, Michael B & Schlee, Edward E, 2001. "Mean-Variance Preferences and Investor Behaviour," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 111(474), pages 849-61, October.
  6. Sinn, Hans-Werner, 1995. "A Theory of the Welfare State," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1278, C.E.P.R. Discussion Papers.
  7. Wagener, Andreas, 2003. "Comparative statics under uncertainty: The case of mean-variance preferences," European Journal of Operational Research, Elsevier, Elsevier, vol. 151(1), pages 224-232, November.
  8. Moschini, Giancarlo & Hennessy, David A., 2001. "Uncertainty, risk aversion, and risk management for agricultural producers," Handbook of Agricultural Economics, Elsevier, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 1, chapter 2, pages 88-153 Elsevier.
  9. Sinn, Hans-Werner, 1990. " Expected Utility, mu-sigma Preferences, and Linear Distribution Classes: A Further Result," Journal of Risk and Uncertainty, Springer, Springer, vol. 3(3), pages 277-81, September.
  10. Fatma Lajeri-Chaherli, 2002. "More on Properness: The Case of Mean-Variance Preferences," The Geneva Risk and Insurance Review, Palgrave Macmillan, vol. 27(1), pages 49-60, June.
  11. Thomas Eichner & Andreas Wagener, 2003. "Variance Vulnerability, Background Risks, and Mean-Variance Preferences," The Geneva Risk and Insurance Review, Palgrave Macmillan, vol. 28(2), pages 173-184, December.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Jingyuan Li, 2012. "Precautionary saving in the presence of labor income and interest rate risks," Journal of Economics, Springer, Springer, vol. 106(3), pages 251-266, July.
  2. Udo Broll & Antonio Roldán-Ponce & Jack Wahl, 2013. "Regional investment under uncertain costs of location," The Annals of Regional Science, Springer, Springer, vol. 51(3), pages 645-657, December.
  3. Thomas Eichner & Andreas Wagener, 2005. "Notes and Comments: Measures of risk attitude: correspondences between mean-variance and expected-utility approaches," Decisions in Economics and Finance, Springer, Springer, vol. 28(1), pages 53-65, 06.
  4. Andreas Wagener, 2005. "Linear risk tolerance and mean-variance preferences," Economics Bulletin, AccessEcon, vol. 4(1), pages 1-8.
  5. Broll, Udo & Egozcue, Martín & Wong, Wing-Keung, 2009. "Prospect theory and two moment model: the firm under price uncertainty," Dresden Discussion Paper Series in Economics 01/09, Dresden University of Technology, Faculty of Business and Economics, Department of Economics.
  6. Broll, Udo & Roldán-Ponce, Antonio & Wahl, Jack E., 2012. "Regional investment under uncertain costs of location," Dresden Discussion Paper Series in Economics 01/12, Dresden University of Technology, Faculty of Business and Economics, Department of Economics.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:bla:buecrs:v:56:y:2004:i:2:p:159-170. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.