Comparative Risk Aversion: A Formal Approach with Applications to Savings Behaviors

Antoine Bommier, Arnold Chassagnon and François Legrand
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Arnold Chassagnon: LEDA-SDFi - Stratégie et Dynamiques Financières - LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique
François Legrand: EM - EMLyon Business School

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Abstract: We consider a formal approach to comparative risk aversion and applies it to intertemporal choice models. This allows us to ask whether standard classes of utility functions, such as those inspired by Kihlstrom and Mirman (1974), Selden (1978), Epstein and Zin (1989) and Quiggin (1982) are well-ordered in terms of risk aversion. Moreover, opting for this model-free approach allows us to establish new general results on the impact of risk aversion on savings behaviors. In particular, we show that risk aversion enhances precautionary savings, clarifying the link that exists between the notions of prudence and risk aversion.

Date: 2010-01-28
Note: View the original document on HAL open archive server: https://hal.science/hal-00451281v1
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Comparative risk aversion: A formal approach with applications to saving behavior (2012)
Working Paper: Comparative Risk Aversion: A Formal Approach with Applications to Saving Behaviors (2010)
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