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Handbook of the Economics of Risk and Uncertainty
book

Handbook of the Economics of Risk and Uncertainty

by Mark Machina, W. Kip Viscusi
November 2013
Beginner content levelBeginner
896 pages
35h 10m
English
North Holland
Content preview from Handbook of the Economics of Risk and Uncertainty
The Theory of Risk and Risk Aversion
131
Property 1: V(σ, μ) is concave if u(x) is concave.
Property 2: S
u
(σ, μ) S
v
(σ, μ) for all (σ, μ) if u(x) is more risk averse than v(x).
Property 3:
S
µ
0
if u(x) is decreasingly absolute risk averse.
One reason why focusing on random variables from a location and scale family is a
worthwhile exercise is that for decision models with only one random variable, and whose
outcome variable is linear in that random variable, all possible random outcome variables
automatically form a location and scale family. For instance in the single risky asset portfo-
lio choice model where the outcome variable
W = W
0
(
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Publisher Resources

ISBN: 9780444536853