On multivariate prudence

Elyès Jouini (), Clotilde Napp and Diego Nocetti

Journal of Economic Theory, 2013, vol. 148, issue 3, 1255-1267

Abstract: In this note we extend the theory of precautionary saving to the case of multivariate risk. We introduce a notion of multivariate prudence, related to a precautionary premium, and we propose a matrix-measure to capture the strength of the precautionary saving motive. We discuss the usefulness of this measure, in particular for comparing precautionary behavior among individuals. We also characterize the notion of multivariate downside risk aversion as a preference for disaggregating harms across outcomes of multivariate lotteries. We show the link between this notion and the notion of multivariate prudence, we propose a matrix-measure of its intensity, and we illustrate the usefulness of our results in a problem of social discounting.

Keywords: Precautionary saving; Multivariate risk; Prudence; Multivariate risk aversion; Downside risk aversion (search for similar items in EconPapers)
JEL-codes: D81 D91 E21 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S002205311300029X
Full text for ScienceDirect subscribers only

Related works:
Working Paper: On Multivariate Prudence (2013)
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:148:y:2013:i:3:p:1255-1267

DOI: 10.1016/j.jet.2012.10.007

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 ().