Skip to main content
Presentation
When can expected utility handle first-order risk aversion?
American Risk and Insurance Association (ARIA) 2012 Annual Meeting
  • Georges DIONNE, HEC MontrÈal
  • Jingyuan LI, Lingnan University, Hong Kong
Document Type
Presentation
Publication Date
8-1-2012
Keywords
  • Expected utility theory; Örst-order conditional dependent risk aversion; background risk; equity premium puzzle; social security; public investment; consumption risk
Abstract
Expected utility functions are limited to second-order (conditional) risk aversion, while non-expected utility functions can exhibit either Örst-order or second-order (conditional) risk aversion. We extend the concept of orders of conditional risk aversion to orders of conditional dependent risk aversion. We show that Örst-order conditional dependent risk aversion is consistent with the framework of the expected utility hypothesis. Our theoretical result proposes new insights into some economic and Önancial applications.
Publisher Statement

Access to external full text or publisher's version may require subscription.

Citation Information
Dionne, G., & Li, J. (2012, Aug). When can expected utility handle first-order risk aversion? Paper presented at American Risk and Insurance Association (ARIA) 2012 Annual Meeting, Minnesota, US. Abstract retrieved from http://www.aria.org/meetings/2012%20Meetings/5B-When.pdf?.pdf?.pdf