Inner Rate of Risk Aversion (IRRA) and Its Applications to Investment Selection

Yoshio Miyahara ()
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Yoshio Miyahara: Nagoya City University

Asia-Pacific Financial Markets, 2020, vol. 27, issue 2, No 3, 193-212

Abstract: Abstract In this paper we introduce the inner rate of risk aversion (IRRA), which is based on the risk sensitive value measure. And we also introduce the ideas of the scale risk boundary ($$\lambda _{bdry}$$λbdry), the optimal scale ($$\lambda _{opt}$$λopt) and the optimal value ($$V_{opt}$$Vopt). We first construct the rating table of assets based on the IRRA, and then tables of $$\lambda _{bdry}$$λbdry, $$\lambda _{opt}$$λopt and $$V_{opt}$$Vopt. And finally we explain our strategy how to apply those tables to investment selection problems.

Keywords: Risk sensitive value measure (RSVM); Inner rate of risk aversion (IRRA); Rating table; Scale risk boundary; Optimal scale; Investment selection (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s10690-019-09289-x

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