Arrow-Pratt Measures of Risk Aversion: The Multivariate Case

Haim Levy and Azriel Levy

International Economic Review, 1991, vol. 32, issue 4, 891-98

Abstract: Arrow-Pratt measures of risk aversion have been defined for the univariate case. For utility functions having the same ordinal preferences, the authors extend K. J. Arrow's probability premium index to the multivariate case and obtain a unique solution that can be employed to risk-aversion comparison analysis. They also extend G. T. Duncan's definition of the risk premium vector and show that it can be employed in comparative risk aversion once they confine themselves to the same preference ordering. Hence, the authors end up with two multivariate risk indexes that are parallel to the Arrow and Pratt univariate indexes. Copyright 1991 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Date: 1991
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