Effects of background risks on cautiousness with an application to a portfolio choice problem

Hara, Chiaki and Huang, James and Kuzmics, Christoph (2011) Effects of background risks on cautiousness with an application to a portfolio choice problem. Journal of Economic Theory, 146 (1). pp. 346-358. ISSN 0022-0531

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Abstract

We provide necessary and sufficient conditions on an individual's expected utility function under which any zero-mean idiosyncratic risk increases cautiousness (the derivative of the reciprocal of the absolute risk aversion), which is the key determinant for this individual's demand for options and portfolio insurance.

Item Type:
Journal Article
Journal or Publication Title:
Journal of Economic Theory
Uncontrolled Keywords:
/dk/atira/pure/subjectarea/asjc/2000/2002
Subjects:
?? risk aversionrisk tolerancecautiousnessportfolio insuranceidiosyncratic risksbackground risksincomplete marketseconomics and econometricsdiscipline-based research ??
ID Code:
45514
Deposited By:
Deposited On:
11 Jul 2011 18:33
Refereed?:
Yes
Published?:
Published
Last Modified:
15 Jul 2024 12:09