We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
A MATRIX MEASURE OF MULTIVARIATE LOCAL RISK AVERSION.
- Authors
Duncan, George T.
- Abstract
By looking at approximate multivariate risk premiums a matrix measure of multivariate local risk aversion is introduced for a multi-attributed utility function u. This matrix function R(x) = [-uij(x)/ui(x)] generalizes the univariate measure of Pratt and the conditional measure of Keeney. It has particular advantages in assessing the attitude of a decision-maker toward correlated risks, a concern of Richard, and is more informative than the scalar measure proposed by Kihlstrom and Mirman. Simple characteristics of the absolute risk aversion matrix R determine whether a utility function is additive or concave. Assumptions of either constancy or proportionality of R are shown to lead to specific restrictions on the form of u which are more stringent than those of Rothblum.
- Subjects
RISK; RISK aversion; UTILITY theory; MATRICES (Mathematics); ECONOMETRICS; ECONOMICS; RATE of return; ECONOMIC demand; RISK premiums
- Publication
Econometrica, 1977, Vol 45, Issue 4, p895
- ISSN
0012-9682
- Publication type
Article
- DOI
10.2307/1912680