Stochastic Dominance and Absolute Risk Aversion
نویسندگان
چکیده
منابع مشابه
Stochastic Dominance and Absolute Risk Aversion
In this paper we propose the inÞmum of the Arrow-Pratt index of absolute risk aversion as a measure of global risk aversion of a utility function. We then show that, for any given arbitrary pair of distributions, there exists a threshold level of global risk aversion such that all increasing concave utility functions with at least as much global risk aversion would rank the two distributions in...
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Consider an investor trading dynamically to maximize expected utility from terminal wealth. Our aim is to study the dependence between her risk aversion and the distribution of the optimal terminal payoff. Economic intuition suggests that high risk aversion leads to a rather concentrated distribution, whereas lower risk aversion results in a higher average payoff at the expense of a more widesp...
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Theoretically, given a choice over two risky assets with equivalent expected returns, a risk averse expected utility maximizer should choose the second-order stochastically dominant asset. We develop a theoretical framework that allows for decision error, which should decrease in risk aversion. We conduct an experiment using a risk preference elicitation mechanism to identify risk averse indivi...
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We find that, for sufficiently risk-averse agents, strict dominance by pure or mixed actions coincides with dominance by pure actions in the sense of Börgers (1993), which, in turn, coincides with the classical notion of strict dominance by pure actions when preferences are asymmetric. Since risk-aversion is a cardinal feature, all finite single-agent choice problems with ordinal preferences ad...
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ژورنال
عنوان ژورنال: SSRN Electronic Journal
سال: 2003
ISSN: 1556-5068
DOI: 10.2139/ssrn.394310