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Linear risk tolerance and mean-variance preferences

Andreas Wagener

Economics Bulletin, 2005, vol. 4, issue 1, 1-8

Abstract: We translate the property of linear risk tolerance (hyperbolical Arrow-Pratt index of risk aversion) from the expected-utility framework into a condition on the marginal rate of substitution between return and risk in the mean-variance approach.

JEL-codes: D8 (search for similar items in EconPapers)
Date: 2005-01-12
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