THE DEMAND FOR A RISKY ASSET: SIGNING, JOINTLY AND SEPARATELY, THE EFFECTS OF THREE DISTRIBUTIONAL SHIFTS
We show that, if an individual's utility function exhibits a degree of relative temperance smaller than one, the individual will react, in a plausible way, to each of three common shifts in the stochastic distribution of his wealth, namely to FSD shifts, mean-preserving spreads and increases in downside risk. First, we derive, in a unified setting, necessary and sufficient conditions for signing the comparative-static effects of each of these shifts separately, and, second, we invoke implications of the property of mixed risk aversion to merge these separate conditions into a single sufficient condition for jointly signing all comparative-static effects. Copyright Blackwell Publishing Ltd 2005.
Year of publication: |
2005
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Authors: | Paulsson, Thomas ; Sproule, Robert ; Wagener, Andreas |
Published in: |
Metroeconomica. - Wiley Blackwell, ISSN 0026-1386. - Vol. 56.2005, 2, p. 221-232
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Publisher: |
Wiley Blackwell |
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