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Economic Theory

, Volume 21, Issue 4, pp 895–900 | Cite as

More on parametric characterizations of risk aversion and prudence

  • Thomas Eichner
  • Andreas Wagener
Exposita Note

Summary.

This note provides an alternative proof for the equivalence of decreasing absolute prudence (DAP) in the expected utility framework and in a two-parametric approach where utility is a function of the mean and the standard deviation. In addition, we elucidate that the equivalence of DAP and the concavity of utility as a function of mean and variance, which was shown to hold for normally distributed stochastics in Lajeri and Nielsen [4], cannot be generalized.

Keywords and Phrases: Risk aversion, Prudence. 
JEL Classification Numbers: D81. 

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Copyright information

© Springer-Verlag Berlin Heidelberg 2003

Authors and Affiliations

  • Thomas Eichner
    • 1
  • Andreas Wagener
    • 1
  1. 1.Department of Economics, University of Siegen, Hölderlinstraße. 3, 57068 Siegen, GERMANY (e-mail: eichner@vwl.wiwi.uni-siegen.de; wagener@vwl.wiwi.uni-siegen.de) DE

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