Comparative risk aversion: A formal approach with applications to saving behavior

Antoine Bommier, Arnold Chassagnon and François Le Grand

Journal of Economic Theory, 2012, vol. 147, issue 4, 1614-1641

Abstract: We consider a formal approach to comparative risk aversion and apply 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) [16], Selden (1978) [27], Epstein and Zin (1989) [10] and Quiggin (1982) [25] 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.

Keywords: Risk aversion; Saving behavior; Precautionary savings (search for similar items in EconPapers)
JEL-codes: D11 D81 D91 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (30)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0022053110001444
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Comparative Risk Aversion: A Formal Approach with Applications to Saving Behaviors (2010)
Working Paper: Comparative Risk Aversion: A Formal Approach with Applications to Savings Behaviors (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:147:y:2012:i:4:p:1614-1641

DOI: 10.1016/j.jet.2010.10.015

Access Statistics for this article

Journal of Economic Theory is currently edited by A. Lizzeri and K. Shell

More articles in Journal of Economic Theory from Elsevier
Bibliographic data for series maintained by Catherine Liu ().