Moment characterization of higher-order risk preferences

Sebastian Ebert

Theory and Decision, 2013, vol. 74, issue 2, 267-284

Abstract: This article presents a characterization of higher-order risk preferences such as prudence or temperance in terms of statistical moments. Our results, which are generalizations of Roger (Theory Decis, 70(1):27–44, 2011 ) and Ekern (Econ Lett, 6(4), 329–333, 1980 ), give a better understanding of how higher-order risk preferences relate to skewness preference and kurtosis aversion. While they are not based on expected utility theory, an implication within that theory is that all commonly used utility functions exhibit skewness preference and kurtosis aversion. Copyright Springer Science+Business Media New York 2013

Keywords: Decision making under risk; Higher-order risk preferences; Kurtosis aversion; Mixed risk aversion; Moments; Prudence; Skewness preference; D81 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (26)

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Working Paper: Moment characterization of higher-order risk preferences (2010)
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DOI: 10.1007/s11238-012-9307-6

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