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Economic indices of absolute and relative riskiness

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  • Amnon Schreiber

Abstract

Following Aumann and Serrano (J Polit Econ 116:810–836, 2008 ) who characterize by axioms an index of riskiness defined on absolute returns, we characterize a new index of riskiness defined on relative returns. Both indices are characterized by a similar principle of duality between risk and risk aversion, but while the index of absolute riskiness refers to absolute risk aversion, the index of relative riskiness refers to relative risk aversion. The similarities and differences between the two indices are studied. Copyright Springer-Verlag Berlin Heidelberg 2014

Suggested Citation

  • Amnon Schreiber, 2014. "Economic indices of absolute and relative riskiness," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 56(2), pages 309-331, June.
    • Handle: RePEc:spr:joecth:v:56:y:2014:i:2:p:309-331
    DOI: 10.1007/s00199-013-0784-9
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    References listed on IDEAS

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    Cited by:

    1. Louis Eeckhoudt & Liqun Liu & Jack Meyer, 2017. "Restricted increases in risk aversion and their application," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 64(1), pages 161-181, June.
    2. Ehsani, Sina & Lien, Donald, 2015. "A note on minimum riskiness hedge ratio," Finance Research Letters, Elsevier, vol. 15(C), pages 11-17.
    3. Hellman, Ziv & Schreiber, Amnon, 2018. "Indexing gamble desirability by extending proportional stochastic dominance," Games and Economic Behavior, Elsevier, vol. 109(C), pages 523-543.
    4. Niu, Cuizhen & Guo, Xu & McAleer, Michael & Wong, Wing-Keung, 2018. "Theory and application of an economic performance measure of risk," International Review of Economics & Finance, Elsevier, vol. 56(C), pages 383-396.
    5. Lu, Richard & Horng, Tzyy-Leng & Horng, Min-Sun & Wang, Amy Z.-H., 2023. "A performance evaluation of portfolio insurance under the Black and Scholes framework: An application of the economic index of riskiness," The Quarterly Review of Economics and Finance, Elsevier, vol. 89(C), pages 269-276.
    6. Heller, Yuval & Schreiber, Amnon, 2020. "Short-term investments and indices of risk," Theoretical Economics, Econometric Society, vol. 15(3), July.
    7. Schreiber, Amnon, 2015. "A note on Aumann and Serrano’s index of riskiness," Economics Letters, Elsevier, vol. 131(C), pages 9-11.
    8. Richard Lu & Chen-Chen Yang & Wing-Keung Wong, 2018. "Time Diversification: Perspectives From The Economic Index Of Riskiness," Annals of Financial Economics (AFE), World Scientific Publishing Co. Pte. Ltd., vol. 13(03), pages 1-15, September.
    9. Yuval Heller & Amnon Schreiber, 2020. "Short-Term Investments and Indices of Risk," Papers 2005.06576, arXiv.org.

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    More about this item

    Keywords

    Riskiness; Risk aversion; Index of riskiness; Absolute risk; Relative risk; D81; G32;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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