Prudence, temperance, edginess and higher degree risk apportionment as decreasing correlation aversion

Changes in Risk and the Demand for Saving

This paper examines how stochastic changes in risk a¤ect the demand for saving. We consider two models of savings demand: one in which future labor income is risky and one in which the return on savings is risky. In each model, we examine the e¤ects of anN -degree stochastic change in the risk. For each case, we establish necessary and su¢ cient conditions on preferences that will guarantee tha...

Putting Risk in Its Proper Place

This paper examines preferences towards particular classes of lottery pairs. We show how concepts such as prudence and temperance can be fully characterized by a preference relation over these lotteries. If preferences are defined in an expected-utility framework with differentiable utility, the direction of preference for a particular class of lottery pairs is equivalent to signing the nth der...

Higher Order Risk Attitudes, Demographics, and Financial Decisions

We study the prevalence of the higher order risk attitudes of prudence and temperance, in a large demographically representative sample, as well as in a sample of undergraduate students. Participants make pairwise choices between lotteries of the form proposed by Eeckhoudt and Schlesinger (2006). The choices in these lotteries isolate prudent from imprudent, and temperate from intemperate, beha...

Higher-Order Risk Attitudes toward Correlation

Higher-order risk attitudes other than risk aversion (e.g., prudence and temperance) play vital roles both in theoretical and empirical work. While the literature has mainly focused on how they entail a preference for combining “good” outcomes with “bad” outcomes, We consider here an alternative approach which relates higher-order risk attitudes to the sign of correlation. The theoretical resul...

Joint measurement of risk aversion , prudence and temperance