Expected utility functions are limited to second-order (conditional) risk aversion, while non-expected utility functions can exhibit either first-order or second-order (conditional) risk aversion. We extend the concept of orders of conditional risk aversion to orders of conditional dependent...

We consider the original Arrow-Lind framework in which a government undertakes a risky project to be shared among many taxpayers. In our model, the taxpayers decide the level of participation in the risky project. Moreover, the amount of taxes collected by the government fully finances the...

We consider the original Arrow-Lind framework in which a government undertakes a risky project to be shared among many taxpayers. In our model, the taxpayers decide the level of participation in the risky project. Moreover, the amount of taxes collected by the government fully finances the...

This paper is on decision theoretical foundations for various types of VaR models, including VaR and conditional-VaR, as objective measures of downside risk for financial prospects. We establish the connections of the VaRs with the first- and the second-order stochastic dominance investment...

This paper applies the dichotomous theory of choice by Zou (2000a) tothe analysis of investmentstrategies and security markets. Issues concerning individualoptimality, (approximate) arbitrage,capital market equilibrium, and Pareto efficiency are studied undervarious market conditions. Among the...

This experimental paper investigates the impact of emotions on risk and return estimates of stocks. Participants rate well-known blue-chip firms on an emotional scale and forecast risk and return of the firms' stock. We find that positive emotions lead to a prediction of high return and low...

A new class of risk measures called cash sub-additive risk measures is introduced to assess the risk of future financial, nonfinancial and insurance positions. The debated cash additive axiom is relaxed into the cash sub-additive axiom to preserve the original difference between the numeraire of...

The distinction of risk vs uncertainty as made by Knight has important implications for policy selection. Assuming the former when the latter is relevant can lead to wrong decisions. With the aid of a stylized model that describes a bank's decision on how to allocate loans, the authors discuss...