Should you buy a stock or a corporate bond? Another characterization of cautiousness

Huang, James and Stapleton, Richard (2012) Should you buy a stock or a corporate bond? Another characterization of cautiousness. Working Paper. UNSPECIFIED.

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Abstract

Should you buy a stock or a corporate bond? A common belief is that the Pratt-Arrow risk aversion measure gives the answer: a more risk averse investor will prefer more a corporate bond to a stock. However, this is not always true. In a simple portfolio problem with a riskless bond, a stock and a corporate bond from a firm, we show that, it is not the risk aversion measure but a downside risk aversion measure called cautiousness which gives the answer to the question: a more cautious investor will prefer more a stock to a corporate bond. While in some cases downside risk aversion agrees with risk aversion, in some other cases it does not.

Item Type:
Monograph (Working Paper)
Uncontrolled Keywords:
/dk/atira/pure/researchoutput/libraryofcongress/hf5601
Subjects:
ID Code:
58959
Deposited By:
Deposited On:
08 Oct 2012 12:45
Refereed?:
No
Published?:
Published
Last Modified:
21 Jun 2020 23:55