In recent research in the areas of finance (see Campbell and Viceira [2002], Garcia, Luger and Renault [2003]) and macroeconomics (for exemple, Weil [1989], Obstfeld [1994], Tallarini [2000], Epaulard and Pommeret [2003]), preferences of agents are characterized by recursive utility functions (Kreps and Porteus [1978], Epstein and Zin [1989]). This class of preferences permits to disentagle ris...

This paper explores analytically the implications of higher order moments in the distribution of returns for the myopic optimal portfolio of an expected utility maximizer. The use of cumulant generating functions and entropy is crucial to find these solutions. With constant absolute risk aversion (CARA) utility, I find in closed form the optimal amount of risky asset for many distributions. My ...

We explore situations in which a decision-maker bears responsibility for somebody else's outcomes as well as for her own. We study such choices for gains and losses, and for different gain probabilities. For 50-50 lotteries over gains we find that being responsible for somebody else's payoffs increases risk aversion. In the loss domain, on the other hand, we find significantly different behavio...

This paper distinguishes relative risk aversion and resistance to intertemporal substitution in climate risk modeling. Stochastic recursive preferences are introduced in a stylized numeric climate-economy model using preliminary IPCC 1998 scenarios. It shows that higher risk aversion increases the optimal carbon tax. Higher resistance to intertemporal substitution alone has the same effect as i...

This paper investigates the degree of risk aversion exhibited by Irish fund managers. Assuming a mean-variance optimising manager, we employ the dynamic conditional correlation specification (Engle, 2002) of the multivariate GARCH model to estimate the coefficient of relative risk aversion. We find that fund managers whose remit is to “aggressively” manage their portfolios have coefficients lyi...

I propose an S-shaped utility function of consumption which, combined with an heterogeneous agents and external habit setting, fits well the first order moments of the American financial and macroeconomic time series relevant for the equity premium puzzle in the second half of XX century. The average relative risk aversion of the agents remains in the 0-3 range. A "black swan"-kind phenomenon m...

BACKGROUND Anxiety disorders are associated with disruptions in both emotional processing and decision making. As a result, anxious individuals often make decisions that favor harm avoidance. However, this bias could be driven by enhanced aversion to uncertainty about the decision outcome (e.g., risk) or aversion to negative outcomes (e.g., loss). Distinguishing between these possibilities may ...

the relationship between finance and other social sciences as known behavioural finance, evaluate investors to the decision-making process and their reaction to different conditions of financial markets deals. in this study assumed that analysts are specialist in fundamental and technical analysis and then influence their personality characteristics is evaluated on their performance. statistica...

We study optimal harvesting of a renewable resource with stochastic dynamics. To focus on the effect risk aversion, we consider user who is indifferent respect to intertemporal variability. In this setting, constant escapement strategy optimal, i.e. stock after constant. find that under common specifications increasing and aversion increase current use. show due an investment effect, invests in...