Do entrepreneurs consider the risk of their business equity when making investment portfolio allocations? Many people compartmentalize different risks and consider them separately, called mental accounting. Alternatively, the risk substitution hypothesis suggests that entrepreneurs would offset...

We show that if an agent is uncertain about the precise form of his utility function, his actual relative risk aversion may depend on wealth even if he knows his utility function lies in the class of constant relative risk aversion (CRRA) utility functions. We illustrate the consequences of this...

A random variable (RV) X is given aminimum selling price $$S_U \left( X \right):=\mathop {\sup }\limits_x \left\{ {x + EU\left( {X - x} \right)} \right\}$$ and amaximum buying price $$B_p \left( X \right):=\mathop {\inf }\limits_x \left\{ {x + EP\left( {X - x} \right)} \right\}$$ whereU(·)...

Though risk attitude is central to economics and finance, relatively little is known about how it is formed and how it changes over time. Based on US data from a dedicated psycho-social module on lifestyle of the 2010 Health and Retirement Study (HRS), we provide new evidence on the correlation...

The abolition of the milk quota regime in April 2015 will provide the opportunity for many profitable Irish dairy farms to increase their production levels. Market risk will influence the decision-making process at the farm level. Dairy farmers have acquired more recent experience of market risk...

This paper casts the opportunity set hedging demand in terms of the certainty equivalent of wealth for an investor who considers both consumption and bequest motives and is constrained to invest his asset proportions of wealth in a convex set. We show that the hedge portfolio exactly balances...