When can expected utility handle first-order risk aversion?
نویسندگان
چکیده
Expected utility functions are limited to second-order (conditional) risk aversion, while non-expected utility functions can exhibit either rst-order or second-order (conditional) risk aversion. We extend the concept of orders of conditional risk aversion to orders of conditional dependent risk aversion. We show that rst-order conditional dependent risk aversion is consistent with the framework of the expected utility hypothesis. Our theoretical result proposes new insights into some economic and nancial applications. Keywords: Expected utility theory; rst-order conditional dependent risk aversion; background risk; equity premium puzzle; social security; public investment; consumption risk. JEL classi cation: D81; G10 Corresponding author: Email [email protected]; Tel 514-340-6596; Fax 514-340-5019.
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ورودعنوان ژورنال:
- J. Economic Theory
دوره 154 شماره
صفحات -
تاریخ انتشار 2014