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Comparative risk aversion of different preferences

Author

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  • Richard Ruble

    (EMLYON RECHERCHE - EMLYON Business School, GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique)

Abstract

An 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.

Suggested Citation

  • Richard Ruble, 2011. "Comparative risk aversion of different preferences," Post-Print halshs-00585615, HAL.
  • Handle: RePEc:hal:journl:halshs-00585615
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00585615
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    Keywords

    risk aversion; risk premium;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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