Comparative Risk Aversion under Background Risks Revisited

Masamitsu Ohnishi () and Yusuke Osaki ()
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Masamitsu Ohnishi: Graduate School of Economics, Osaka University
Yusuke Osaki: JSPS Research Fellow

No 06-16, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: This note determines a sufficient condition on (von Neumann-Morgenstern) utility functions to preserve (reserve) comparative risk aversion under general background risks. Our condition is weaker than the one determined by Nachman (1982, Journal of Economic Theory). Nachman fs condition requires the monotonicity in the global sense, in other hand our condition only requires it in the local sense. And this generalization may make the condition on utility functions to hold the desirable property consisitent with the recent empirical observation.

Keywords: Background risk; comparative risk aversion; single crossing condition. (search for similar items in EconPapers)
JEL-codes: D81 (search for similar items in EconPapers)
Pages: 12 pages
Date: 2006-06
New Economics Papers: this item is included in nep-fmk and nep-upt
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Citations: View citations in EconPapers (2)

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