IDEAS home Printed from https://ideas.repec.org/a/taf/applec/v43y2009i9p1139-1150.html
   My bibliography  Save this article

Interval risk aversion

Author

Listed:
  • Joseph Eisenhauer
  • Luigi Ventura

Abstract

The conventional measures of absolute and relative risk aversion are appropriate for measuring preferences locally, but because they rely on differential calculus, they cannot accurately capture attitudes towards high-stakes risks involving potentially large changes in wealth. Eisenhauer (2006) has recently proposed an alternative approach which avoids the use of calculus. The present article extends that work in two ways. First, the Pratt-Arrow coefficient of absolute risk aversion is generalized into a measure of interval risk aversion, suitable for analysing preferences over risks of any magnitude, and a corresponding interval measure of relative risk aversion is constructed from preference and risk parameters, without explicit reference to initial wealth or income. Second, the new measures are applied to survey data from the Bank of Italy, to illustrate their empirical applicability to large-scale risk.

Suggested Citation

  • Joseph Eisenhauer & Luigi Ventura, 2009. "Interval risk aversion," Applied Economics, Taylor & Francis Journals, vol. 43(9), pages 1139-1150.
    • Handle: RePEc:taf:applec:v:43:y:2009:i:9:p:1139-1150
    DOI: 10.1080/00036840802600285
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/00036840802600285
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/00036840802600285?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. CHANDER, Parkash, 2000. "A simple measure of risk aversion in the large and an application," LIDAM Discussion Papers CORE 2000041, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Parkash Chander, 2006. "Repetitive risk aversion," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 29(3), pages 701-711, November.
    2. Eisenhauer, Joseph G., 2006. "Risk aversion and prudence in the large," Research in Economics, Elsevier, vol. 60(4), pages 179-187, December.
    3. Eisenhauer, Joseph G., 2010. "Rank-ordering of risk preferences with conventional and discrete measures," The Quarterly Review of Economics and Finance, Elsevier, vol. 50(3), pages 291-297, August.
    4. Parkash Chander, 2004. "Risk Aversion and Income Tax Enforcement," Econometric Society 2004 Far Eastern Meetings 531, Econometric Society.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:applec:v:43:y:2009:i:9:p:1139-1150. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAEC20 .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.