Comparative risk aversion of different preferences
AbstractAn article about Kihlstrom and Mirman about comparative risk aversion with many goods is critiqued. If "more risk averse" is interpreted as signifying that an individual is less willing to accept a median-preserving spread, then risk aversion cannot be compared across individuals with different preferences. If it is interpreted as signifying that an individual has a greater directional risk premium, then risk aversion may be compared across individuals with different preferences, in particular in partial equilibrium analysis.
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Date of creation: 2011
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risk aversion; risk premium;
Other versions of this item:
- Richard Ruble, 2011. "Comparative risk aversion of different preferences," Working Papers 1119, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-04-23 (All new papers)
- NEP-NEU-2011-04-23 (Neuroeconomics)
- NEP-UPT-2011-04-23 (Utility Models & Prospect Theory)
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