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A Robust Approach to Risk Aversion
Bommier, Antoine; Le Grand, François - 2013
We investigate whether the set of Kreps and Porteus (1978) preferences include classes of preferences that are stationary, monotonic and well-ordered in terms of risk aversion. We prove that the class of preferences introduced by Hansen and Sargent (1995) in their robustness analysis is the only...
Persistent link: https://www.econbiz.de/10011753236
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An Experimental Investigation of the Role of Errors for Explaining Violations of Expected Utility
Neugebauer, Tibor; Schmidt, Ulrich - 2003
One possible conclusion from recent experimental research on decision making under risk is that observed behaviour can be reasonable accommodated by expected utility plus an error term. This conclusion implies that the violation rate of expected utility should decrease if errors are excluded....
Persistent link: https://www.econbiz.de/10010261667
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From preferences to Cobb-Douglas utility
Voorneveld, Mark - 2008
We provide characterizations of preferences representable by a Cobb-Douglas utility function.
Persistent link: https://www.econbiz.de/10010281260
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Outer measure and utility
Voorneveld, Mark; Weibull, Jörgen W. - 2008
approach for countable domains and combining this with basic measure theory, we obtain necessary and sufficient conditions for … the existence of upper semi-continuous utility functions on a wide class of domains. Although links between utility theory … and measure theory have been pointed out before, to the best of our knowledge this is the first time that the present …
Persistent link: https://www.econbiz.de/10010281322
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What Determines the Shape of the Probability Weighting Function?
Fehr-Duda, Helga; Schürer, Marc; Schubert, Renate - 2006
When valuing risky prospects, people typically overweight small probabilities and underweight medium and large probabilities, but there is vast heterogeneity in individual behavior. We explore the relationship between person-specific probability weights, estimated from investment decisions in a...
Persistent link: https://www.econbiz.de/10011753119
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Risk, uncertainty and monetary policy
Bekaert, Geert; Hoerova, Marie; Lo Duca, Marco - 2012
The VIX, the stock market option-based implied volatility, strongly co-moves with measures of the monetary policy stance. When decomposing the VIX into two components, a proxy for risk aversion and expected stock market volatility (“uncertainty”), we find that a lax monetary policy decreases...
Persistent link: https://www.econbiz.de/10011506749
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Do Wages Really Compensate for Risk Aversion and Skewness Affection?
Hartog, Joop; Vijverberg, Wim P. M. - 2002
Utility theory suggests that foreseeable risk should increase the compensation for work. This paper expands on this … notion: on basis of utility theory, people should care not only about risk but also about the skewness in the distribution of …
Persistent link: https://www.econbiz.de/10010262821
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Constant relative risk aversion and form equivalence classes
Battermann, Harald L.; Broll, Udo; Wahl, Jack E. - 1997
We derive a class of utility functions that are equivalent with respect to a well-defined functional form. We apply a general view of constant relative risk aversion to investigate on different equivalence relations. Then we compare our results with standard applications in economics and finance.
Persistent link: https://www.econbiz.de/10010397965
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Barriers to Diversification and Regional Allocation of Capital
Broll, Udo; Roldán-Ponce, Antonio; Wahl, Jack E. - 2007
In order to evaluate the allocational effectiveness of regional policy when harmonizing regional economic conditions firms? preferences play a pivot role. If harmonization hinders risk diversification of the firm, then instead of regional diversification of capital agglomeration of capital...
Persistent link: https://www.econbiz.de/10010296826
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Export production under exchange rate uncertainty
Broll, Udo; Gilroy, B. Michael; Lukas, Elmar - 2008
Given that a multinational enterprise can react flexibly upon exchange rate movements, international trade flows may be interpreted as an option. An enterprise will opt to export if the profits obtained from exporting under given exchange rate developments are greater than if foreign subsidiary...
Persistent link: https://www.econbiz.de/10010300614