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Increases in risk and demand for risky asset

Author

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  • Alain Chateauneuf

    (CERMSEM - CEntre de Recherche en Mathématiques, Statistique et Économie Mathématique - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Ghizlane Lakhnati

    (CERMSEM - CEntre de Recherche en Mathématiques, Statistique et Économie Mathématique - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

Abstract

In this paper, we examine the effect of a decrease in risk on the demand for risky asset in the standard portfolio problem. We introduce a new class of dominance, that we name relative order and we prove that this class of dominance is consistent both with central dominance introduced by Gollier [5] and with mean preserving increase in risk. Finally, we show that some known classes of dominance are particular cases of our new class of dominance.

Suggested Citation

  • Alain Chateauneuf & Ghizlane Lakhnati, 2005. "Increases in risk and demand for risky asset," Post-Print halshs-00194413, HAL.
    • Handle: RePEc:hal:journl:halshs-00194413
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00194413
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    Cited by:

    1. Inmaculada Rodríguez-Puerta & Alberto A. Álvarez-López, 2022. "A model for the optimal selection of lenders," Annals of Operations Research, Springer, vol. 313(2), pages 1269-1284, June.
    2. Broll, Udo & Guo, Xu & Welzel, Peter & Wong, Wing-Keung, 2015. "The banking firm and risk taking in a two-moment decision model," Economic Modelling, Elsevier, vol. 50(C), pages 275-280.

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    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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