Paper.pdf (144.46 kB)
Download file

Standard Risk Aversion and Efficient Risk Sharing

Download (144.46 kB)
journal contribution
posted on 13.05.2019, 15:32 by Richard M. H. Suen
This paper analyzes the risk attitude and investment behavior of a group of heterogeneous consumers who face an uninsurable background risk. It is shown that standard risk aversion at the individual level does not imply standard risk aversion at the group level under efficient risk sharing. This points to a potential divergence between individual and collective portfolio choices in the presence of background risk. We show that if the members’ absolute risk tolerance is increasing and satisfies a strong form of concavity, then the group has standard risk aversion.

History

Citation

Economics Letters, 2018, 173, pp. 23-26

Author affiliation

/Organisation/COLLEGE OF SOCIAL SCIENCES, ARTS AND HUMANITIES/School of Business

Version

AM (Accepted Manuscript)

Published in

Economics Letters

Publisher

Elsevier

issn

0165-1765

Acceptance date

09/09/2018

Copyright date

2018

Publisher version

https://www.sciencedirect.com/science/article/pii/S0165176518303835

Notes

The file associated with this record is under embargo until 18 months after publication, in accordance with the publisher's self-archiving policy. The full text may be available through the publisher links provided above.

Language

en