Greater downside risk aversion in the large

• 成果类型: Article
• 署名作者: Keenan, Donald C.; Snow, Arthur
• 署名单位: University System of Georgia; University of Georgia
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2008.08.007
• 发表日期: 2009
• 页码: 1092-1101
• 关键词: Downside risk; risk aversion; Arrow-Pratt; Diamond-Stiglitz

摘要

In this paper, we advance a definition of greater downside risk aversion that applies to both large and small changes in risk preference, and thereby complements the results for small changes reported previously. We show that a downside risk-averse transformation of a utility function results in a function that is more downside risk averse in the same manner that a risk-averse transformation increases risk aversion. Our demonstration is conducted first by using the compensated approach introduced by Diamond and Stiglitz [P. Diamond, J. Stiglitz, Increases in risk and in risk aversion, J. Econ. Theory 8 (1974) 337-360] and then by using an adaptation of the risk premium approach taken by Pratt [J. Pratt, Risk aversion in the small and in the large, Econometrica 32 (1964) 122-136]. (C) 2008 Elsevier Inc. All rights reserved.