This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

An Economic Index of Riskiness

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Robert J. Aumann ()
Roberto Serrano ()

Additional information is available for the following registered author(s):

Abstract

Define the riskiness of a gamble as the reciprocal of the absolute risk aversion (ARA) of an individual with constant ARA who is indifferent between taking and not taking that gamble. We characterize this index by axioms, chief among them a "duality" axiom which, roughly speaking, asserts that less risk-averse individuals accept riskier gambles. The index is homogeneous of degree 1, monotonic with respect to first and second order stochastic dominance, and for gambles with normal distributions, is half of variance/mean. Examples are calculated, additional properties derived, and the index is compared with others in the literature.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. 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.ma.huji.ac.il/~raumann/pdf/Economic%20Index%20of%20Riskiness.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by Center for Rationality and Interactive Decision Theory, Hebrew University, Jerusalem in its series Discussion Paper Series with number dp446.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 18 pages
Date of creation: Feb 2007
Date of revision:
Handle: RePEc:huj:dispap:dp446

Contact details of provider:
Postal: Feldman Building - Givat Ram - 91904 Jerusalem
Phone: +972-2-6584135
Fax: +972-2-6513681
Email:
Web page: http://www.ratio.huji.ac.il/
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Ron Peretz).

Related research
Keywords: Riskiness; Risk Aversion; Expected Utility; Decision Making under Uncertainty; Portfolio Choice; Sharpe Ratio; Variance-Mean Ratio; Value at Risk;

Other versions of this item:

Find related papers by JEL classification:
C00 - Mathematical and Quantitative Methods - - General - - - General
C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
D00 - Microeconomics - - General - - - General
D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
G00 - Financial Economics - - General - - - General

This paper has been announced in the following NEP Reports:

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.:
  1. Hadar, Josef & Russell, William R, 1969. "Rules for Ordering Uncertain Prospects," American Economic Review, American Economic Association, vol. 59(1), pages 25-34, March. [Downloadable!] (restricted)
  2. Hanoch, G & Levy, Haim, 1969. "The Efficiency Analysis of Choices Involving Risk," Review of Economic Studies, Blackwell Publishing, vol. 36(107), pages 335-46, July. [Downloadable!] (restricted)
  3. Palacios-Huerta, Ignacio & Serrano, Roberto, 2006. "Rejecting small gambles under expected utility," Economics Letters, Elsevier, vol. 91(2), pages 250-259, May. [Downloadable!] (restricted)
    Other versions:
  4. Aumann, Robert J & Kurz, Mordecai, 1977. "Power and Taxes," Econometrica, Econometric Society, vol. 45(5), pages 1137-61, July. [Downloadable!] (restricted)
  5. Diamond, Peter A. & Stiglitz, Joseph E., 1974. "Increases in risk and in risk aversion," Journal of Economic Theory, Elsevier, vol. 8(3), pages 337-360, July. [Downloadable!] (restricted)
  6. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September. [Downloadable!] (restricted)
  7. Tobin, James, 1969. "Comment on Borch and Feldstein," Review of Economic Studies, Blackwell Publishing, vol. 36(105), pages 13-14, January. [Downloadable!] (restricted)
  8. Matthew Rabin, 2000. "Risk Aversion and Expected-Utility Theory: A Calibration Theorem," Econometrica, Econometric Society, vol. 68(5), pages 1281-1292, September.
Full references

Statistics
Access and download statistics

Did you know? Over 1000 institutions contribute their bibliographic data directly to this service.

This page was last updated on 2009-11-22.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.