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Article: Comparative Higher-Order Risk Aversion and Higher-Order Prudence
Title | Comparative Higher-Order Risk Aversion and Higher-Order Prudence |
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Authors | |
Keywords | Comparative prudence Comparative risk aversion Prudence utility premium Utility premium |
Issue Date | 2018 |
Publisher | Elsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/ecolet |
Citation | Economics Letters, 2018, v. 169, p. 38-42 How to Cite? |
Abstract | In this paper, we define the nth-degree utility premium as the pain associated with facing the passage from a more favorable risk to a less favorable risk, where the risk increase is specified by the notion of more nth-degree risk. We further define the nth-degree prudence utility premium as the increase in pain when the individual suffers a sure loss. We show that the nth-degree utility premium, normalized by the (n-1)th derivative of the utility function evaluated at the initial wealth, can explain comparative risk aversion of higher orders. On the other hand, the nth-degree prudence utility premium, normalized by the nth derivative of the utility function evaluated at the initial wealth, can explain comparative prudence of higher orders. |
Persistent Identifier | http://hdl.handle.net/10722/254641 |
ISSN | 2023 Impact Factor: 2.1 2023 SCImago Journal Rankings: 0.729 |
ISI Accession Number ID |
DC Field | Value | Language |
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dc.contributor.author | Wong, KP | - |
dc.date.accessioned | 2018-06-21T01:03:55Z | - |
dc.date.available | 2018-06-21T01:03:55Z | - |
dc.date.issued | 2018 | - |
dc.identifier.citation | Economics Letters, 2018, v. 169, p. 38-42 | - |
dc.identifier.issn | 0165-1765 | - |
dc.identifier.uri | http://hdl.handle.net/10722/254641 | - |
dc.description.abstract | In this paper, we define the nth-degree utility premium as the pain associated with facing the passage from a more favorable risk to a less favorable risk, where the risk increase is specified by the notion of more nth-degree risk. We further define the nth-degree prudence utility premium as the increase in pain when the individual suffers a sure loss. We show that the nth-degree utility premium, normalized by the (n-1)th derivative of the utility function evaluated at the initial wealth, can explain comparative risk aversion of higher orders. On the other hand, the nth-degree prudence utility premium, normalized by the nth derivative of the utility function evaluated at the initial wealth, can explain comparative prudence of higher orders. | - |
dc.language | eng | - |
dc.publisher | Elsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/ecolet | - |
dc.relation.ispartof | Economics Letters | - |
dc.rights | This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License. | - |
dc.subject | Comparative prudence | - |
dc.subject | Comparative risk aversion | - |
dc.subject | Prudence utility premium | - |
dc.subject | Utility premium | - |
dc.title | Comparative Higher-Order Risk Aversion and Higher-Order Prudence | - |
dc.type | Article | - |
dc.identifier.email | Wong, KP: kpwongc@hkucc.hku.hk | - |
dc.identifier.authority | Wong, KP=rp01112 | - |
dc.description.nature | postprint | - |
dc.identifier.doi | 10.1016/j.econlet.2018.05.005 | - |
dc.identifier.scopus | eid_2-s2.0-85047300210 | - |
dc.identifier.hkuros | 285394 | - |
dc.identifier.volume | 169 | - |
dc.identifier.spage | 38 | - |
dc.identifier.epage | 42 | - |
dc.identifier.isi | WOS:000437380400010 | - |
dc.publisher.place | Netherlands | - |
dc.identifier.issnl | 0165-1765 | - |