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Reversibly greater downside risk aversion by a prudence-based measure

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  • Keenan, Donald C.
  • Snow, Arthur

Abstract

We show that p−3r and r increasing, that is, both being greater for utility v than for u, implies greater downside risk aversion for v, where r is the Arrow–Pratt measure and p is the prudence measure. Moreover, this property is reversible, in that p−3r and r together decreasing implies less downside risk aversion.

Suggested Citation

  • Keenan, Donald C. & Snow, Arthur, 2022. "Reversibly greater downside risk aversion by a prudence-based measure," Economics Letters, Elsevier, vol. 210(C).
    • Handle: RePEc:eee:ecolet:v:210:y:2022:i:c:s0165176521004456
    DOI: 10.1016/j.econlet.2021.110188
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    References listed on IDEAS

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    Cited by:

    1. De Donno, Marzia & Menegatti, Mario, 2022. "On the relationship between comparisons of risk aversion of different orders," Journal of Mathematical Economics, Elsevier, vol. 102(C).

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    More about this item

    Keywords

    Prudence; Risk aversion; Downside risk aversion;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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