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 ??

Departments:

Lancaster University Management School > Accounting & Finance

ID Code:

45514

Deposited By:

ep_importer_pure

Deposited On:

11 Jul 2011 18:33

Refereed?:

Yes

Published?:

Published

Last Modified:

15 Jul 2024 12:09

URI:

https://eprints.lancs.ac.uk/id/eprint/45514