 Dynamic strategies when consumption and wealth risk aversions differPierre Six
Post-Print from HAL Abstract: This paper focuses on the consequences on asset allocation of an empirical fact outlined in a recent survey of the literature about risk aversion (Meyer and Meyer, 2005): Investors are more risk averse toward consumption than they are toward wealth. We demonstrate that this empirical fact can be assessed with the study of a single financial variable. This variable measures the share of wealth that investors set aside to satisfy their future consumption. We show that this variable depends on wealth only when the empirical case is considered. Our findings build on some methodological results developed by Karatzas et al. (1987) as well as insights provided by Wachter (2002) and Munk and Sørensen (2007) for the restricted setting in which risk aversions are equal. Keywords: consumption; wealth.; risk aversion; dynamic asset allocation; Merton-Breeden hedging demand; consumptionwealth ratio; wealth elasticity of consumption; aversion pour le risque; allocation dynamique d'actifs; demande de couverture à la Merton-Breeden; rapport consommation-richesse; élasticité consommation richesse; consommation; richesse (search for similar items in EconPapers) Published in Eastern Finance Association Annual Meetings, Apr 2010, Miami Beach, Florida, United States There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00657725 Access Statistics for this paper More papers in Post-Print from HAL |
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