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Moment characterization of higher-order risk preferences

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Abstract

This article presents a characterization of higher-order risk preferences such as prudence or temperance in terms of statistical moments. Our results, which are generalizations of Roger (Theory Decis, 70(1):27–44, 2011) and Ekern (Econ Lett, 6(4), 329–333, 1980), give a better understanding of how higher-order risk preferences relate to skewness preference and kurtosis aversion. While they are not based on expected utility theory, an implication within that theory is that all commonly used utility functions exhibit skewness preference and kurtosis aversion.

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Authors and Affiliations

  1. Institute for Financial Economics and Statistics, University of Bonn, Adenauerallee 24–42, 53113, Bonn, Germany

    Sebastian Ebert

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  1. Sebastian Ebert
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Correspondence to Sebastian Ebert.

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Ebert, S. Moment characterization of higher-order risk preferences. Theory Decis 74, 267–284 (2013). https://doi.org/10.1007/s11238-012-9307-6

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  • DOI: https://doi.org/10.1007/s11238-012-9307-6

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