Measures of Risk Aversion: Some Clarifying Comments
Stephen Miller ()
Journal of Financial and Quantitative Analysis, 1975, vol. 10, issue 2, 299-309
Two prominent views pertaining to measures of risk aversion can be found in the literature. First, Arrow  and Pratt developed risk aversion measures based on the curvature characteristics of the individual investor's utility for wealth function. If the investor's utility for wealth function is given by V(W), thenare the Arrow-Pratt measures of absolute and relative risk aversion, respectively. The investor is risk averse or a risk lover as r(W) and r* (W) are positive or negative. The investor exhibits increasing, constant, or decreasing absolute risk aversion as while he exhibits increasing, constant, or decreasing relative risk aversion as .
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