We study various decision problems regarding short‐term investments in risky assets whose returns evolve continuously in time. We show that in each problem, all risk‐averse decision makers have the same (problem‐dependent) ranking over short‐term risky assets. Moreover, in each problem,...

Our understanding of risk preferences can be sharpened by considering their evolutionary basis. The existing literature has focused on two sources of risk: idiosyncratic risk and aggregate risk. We introduce a new source of risk—heritable risk—in which there is a positive correlation between...