Title

When can expected utility handle first-order risk aversion?

Document Type

Presentation

Source Publication

American Risk and Insurance Association (ARIA) 2012 Annual Meeting

Publication Date

8-2012

Keywords

Expected utility theory; Örst-order conditional dependent risk aversion; background risk; equity premium puzzle; social security; public investment; consumption risk

Abstract

Expected utility functions are limited to second-order (conditional) risk aversion, while non-expected utility functions can exhibit either Örst-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 Örst-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 Önancial applications.

Publisher Statement

Access to external full text or publisher's version may require subscription.

Full-text Version

Publisher’s Version

Language

English

Recommended Citation

Dionne, G., & Li, J. (2012, Aug). When can expected utility handle first-order risk aversion? Paper presented at American Risk and Insurance Association (ARIA) 2012 Annual Meeting, Minnesota, US. Abstract retrieved from http://www.aria.org/meetings/2012%20Meetings/5B-When.pdf?.pdf?.pdf

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