More on Parametric Characterizations of Risk Aversion and Prudence

Thomas Eichner and Andreas Wagener

Volkswirtschaftliche Diskussionsbeiträge from Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht

Abstract: This note provides an alternative proof for the equivalence of decreasing absolute prudence (DAP) in the expected utility framework and in a two-parametric approach where utility is a function of the mean and the standard deviation. In addition, we elucidate that the equivalence of DAP and the concavity of utility as a function of mean and variance, which was shown to hold for normally distributed stochastics in Lajeri and Nielsen [Economic Theory 15 (2000), 469-476], cannot be generalized.

Pages: 6 pages
Date: 2001
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Journal Article: More on parametric characterizations of risk aversion and prudence (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:sie:siegen:99-01

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