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Constant relative risk aversion and form equivalence classes

Author

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  • Battermann, Harald L.
  • Broll, Udo
  • Wahl, Jack E.

Abstract

We derive a class of utility functions that are equivalent with respect to a well-defined functional form. We apply a general view of constant relative risk aversion to investigate on different equivalence relations. Then we compare our results with standard applications in economics and finance.

Suggested Citation

  • Battermann, Harald L. & Broll, Udo & Wahl, Jack E., 1997. "Constant relative risk aversion and form equivalence classes," Discussion Papers, Series II 345, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
    • Handle: RePEc:zbw:kondp2:345
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    References listed on IDEAS

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    1. Pratt, John W & Zeckhauser, Richard J, 1987. "Proper Risk Aversion," Econometrica, Econometric Society, vol. 55(1), pages 143-154, January.
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    3. Chew, Hong Soo & Herk, Leonard F., 1996. "Incremental Risk Aversion and Diversification Preference," Journal of Economic Theory, Elsevier, vol. 70(1), pages 180-200, July.
    4. Kimball, Miles S, 1993. "Standard Risk Aversion," Econometrica, Econometric Society, vol. 61(3), pages 589-611, May.
    5. Rothschild, Michael & Stiglitz, Joseph E., 1971. "Increasing risk II: Its economic consequences," Journal of Economic Theory, Elsevier, vol. 3(1), pages 66-84, March.
    6. Eckwert, Bernhard, 1993. "Allocative effects of financial assets and the long run neutrality of money when markets are incomplete," European Economic Review, Elsevier, vol. 37(1), pages 75-95, January.
    7. Broll, Udo & Wahl, Jack E. & Zilcha, Itzhak, 1995. "Indirect hedging of exchange rate risk," Journal of International Money and Finance, Elsevier, vol. 14(5), pages 667-678, October.
    8. Zilcha, Itzhak, 1987. "Characterizing the efficient set when preferences are state-dependent," Journal of Economic Theory, Elsevier, vol. 41(2), pages 417-423, April.
    9. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
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    Cited by:

    1. Soriano-Morales, Y. V. & Vallejo-Jiménez, Benjamín & Venegas-Martínez, Francisco, 2017. "Impact of the degree of relative risk aversion, the interest rate and the exchange rate depreciation on economic welfare in a small open economy," Panorama Económico, Escuela Superior de Economía, Instituto Politécnico Nacional, vol. 13(25), pages 7-24, Primer se.
    2. Olita, Toto & Schilizzi, Steven & Iftekhar, Sayed, 2023. "Mitigating Risky Conservation Tenders: Can an Insurance Mechanism Be a Solution?," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 48(2), May.

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    More about this item

    Keywords

    risk aversion; equivalence class; utility theory;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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