We found a match
Your institution may have rights to this item. Sign in to continue.
- Title
A STRONGER CHARACTERIZATION OF DECLINING RISK AVERSION.
- Authors
Machina, Mark J.
- Abstract
The article focuses on the hypothesis that absolute risk aversion is a function of wealth. The assumption of the theory of behavior toward risk has been adopted to address wealth and risk aversion. The premium which an individual is willing to pay for complete insurance is a non-increasing function of base wealth, allocating funds between a riskless asset and a risky asset with higher mean return, and the demand for the risky asset is non-decreasing in the level of investible funds. Recently, attention has been called to the fact that seldom does the real world offer complete certainty that the concepts of "complete insurance" and "risk free asset" presume. Typically, insurance contracts cover losses due only to specific causes. Although "complete insurance" may be possible by some combination of policies, it is not usually done by individuals.
- Subjects
RISK; WEALTH; MONEY; ECONOMICS; FINANCE; CAPITAL; UTILITY theory; HYPOTHESIS; VALUE (Economics); INVESTMENT guaranty insurance
- Publication
Econometrica, 1982, Vol 50, Issue 4, p1069
- ISSN
0012-9682
- Publication type
Article
- DOI
10.2307/1912778