IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-01161663.html
   My bibliography  Save this paper

Increases in risk and demand for a risky asset

Author

Listed:
  • Alain Chateauneuf

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Ghizlane Lakhnati

    (National School of Applied Sciences - Université Ibn Zohr [Agadir])

Abstract

We first prove the noteworthy fact that Central Dominance with m=1 (CD1), introduced by Gollier (1995), is a particular case of Second order Stochastic Dominance. We then introduce a new tractable class of dominance that we name Relative order and we prove that this class is a strict subclass of CD1. Finally, we show that some known classes of dominance are particular cases of our new class of dominance.

Suggested Citation

  • Alain Chateauneuf & Ghizlane Lakhnati, 2015. "Increases in risk and demand for a risky asset," Post-Print hal-01161663, HAL.
    • Handle: RePEc:hal:journl:hal-01161663
    DOI: 10.1016/j.mathsocsci.2015.02.005
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Meyer, Jack & Ormiston, Michael B, 1985. "Strong Increases in Risk and Their Comparative Statics," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(2), pages 425-437, June.
    2. Diamond, Peter A. & Stiglitz, Joseph E., 1974. "Increases in risk and in risk aversion," Journal of Economic Theory, Elsevier, vol. 8(3), pages 337-360, July.
    3. Georges Dionne & Christian Gollier, 1992. "Comparative Statics Under Multiple Sources of Risk with Applications to Insurance Demand," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 17(1), pages 21-33, June.
    4. Christian Gollier, 2011. "Portfolio Choices and Asset Prices: The Comparative Statics of Ambiguity Aversion," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 78(4), pages 1329-1344.
    5. Quiggin, John, 1991. "Comparative Statics for Rank-Dependent Expected Utility Theory," Journal of Risk and Uncertainty, Springer, vol. 4(4), pages 339-350, December.
    6. Dionne, Georges & Eeckhoudt, Louis & Gollier, Christian, 1993. "Increases in Risk and Linear Payoffs," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(2), pages 309-319, May.
    7. Gollier Christian, 1995. "The Comparative Statics of Changes in Risk Revisited," Journal of Economic Theory, Elsevier, vol. 66(2), pages 522-535, August.
    8. Meyer, Jack & Ormiston, Michael B., 1983. "The comparative statics of cumulative distribution function changes for the class of risk averse agents," Journal of Economic Theory, Elsevier, vol. 31(1), pages 153-169, October.
    9. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
    10. Rothschild, Michael & Stiglitz, Joseph E., 1971. "Increasing risk II: Its economic consequences," Journal of Economic Theory, Elsevier, vol. 3(1), pages 66-84, March.
    11. Machina, Mark J & Pratt, John W, 1997. "Increasing Risk: Some Direct Constructions," Journal of Risk and Uncertainty, Springer, vol. 14(2), pages 103-127, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Inmaculada Rodríguez-Puerta & Alberto A. Álvarez-López, 2022. "A model for the optimal selection of lenders," Annals of Operations Research, Springer, vol. 313(2), pages 1269-1284, June.
    2. Broll, Udo & Guo, Xu & Welzel, Peter & Wong, Wing-Keung, 2015. "The banking firm and risk taking in a two-moment decision model," Economic Modelling, Elsevier, vol. 50(C), pages 275-280.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Christian Gollier & Miles S. Kimball, 2018. "New methods in the classical economics of uncertainty: comparing risks," The Geneva Papers on Risk and Insurance Theory, Springer;International Association for the Study of Insurance Economics (The Geneva Association), vol. 43(1), pages 5-23, May.
    2. Gollier, Christian & Schlesinger, Harris, 2002. "Changes in risk and asset prices," Journal of Monetary Economics, Elsevier, vol. 49(4), pages 747-760, May.
    3. Tzeng, Larry Y. & Wang, Jen-Hung, 2004. "Increase in risk and saving behavior," Journal of Economics and Business, Elsevier, vol. 56(5), pages 405-414.
    4. Christian Gollier & James Hammitt & Nicolas Treich, 2013. "Risk and choice: A research saga," Journal of Risk and Uncertainty, Springer, vol. 47(2), pages 129-145, October.
    5. Christian Gollier, 2011. "Portfolio Choices and Asset Prices: The Comparative Statics of Ambiguity Aversion," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 78(4), pages 1329-1344.
    6. Claudio Bonilla & Marcos Vergara, 2022. "New results on precautionary saving and nonlinear risks," Journal of Economics, Springer, vol. 136(2), pages 177-189, July.
    7. 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.
    8. Gollier, Christian & Schlesinger, Harris, 1996. "Portfolio choice under noisy asset returns," Economics Letters, Elsevier, vol. 53(1), pages 47-51, October.
    9. Chuang, O-Chia & Kuan, Chung-Ming & Tzeng, Larry Y., 2017. "Testing for central dominance: Method and application," Journal of Econometrics, Elsevier, vol. 196(2), pages 368-378.
    10. Burton Hollifield & Alan Kraus, 2009. "Defining Bad News: Changes in Return Distributions That Decrease Risky Asset Demand," Management Science, INFORMS, vol. 55(7), pages 1227-1236, July.
    11. Peter, Richard & Ying, Jie, 2020. "Do you trust your insurer? Ambiguity about contract nonperformance and optimal insurance demand," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 938-954.
    12. Arcand, Jean-Louis & Hongler, Max-Olivier & Rinaldo, Daniele, 2020. "Increasing risk: Dynamic mean-preserving spreads," Journal of Mathematical Economics, Elsevier, vol. 86(C), pages 69-82.
    13. Justin P. Johnson & David P. Myatt, 2006. "On the Simple Economics of Advertising, Marketing, and Product Design," American Economic Review, American Economic Association, vol. 96(3), pages 756-784, June.
    14. Iltae Kim & Suyeol Ryu, 2006. "The Comparative Statics for Linear Payoffs and Increases in Risk," Korean Economic Review, Korean Economic Association, vol. 22, pages 437-459.
    15. Hennessy, David A., 1993. "Applications of contingent claims theory to microeconomic problems," ISU General Staff Papers 1993010108000011822, Iowa State University, Department of Economics.
    16. Takashi Nishiwaki, 2020. "Does Ambiguity Generate Demand for Options?," Working Papers 2011, Waseda University, Faculty of Political Science and Economics.
    17. Gollier, Christian, 1993. "Portfolio Dominance, Lower Conditional Expectation And The Monotone Likelihood Ratio Order," Working Papers 014, Risk and Insurance Archive.
    18. Ormiston, Michael B. & E. Schlee, Edward, 1999. "Comparative statics tests between decision models under risk," Journal of Mathematical Economics, Elsevier, vol. 32(2), pages 145-166, October.
    19. Snow, Arthur, 2003. "Substitution and income effects for increases in risk," Economics Letters, Elsevier, vol. 79(3), pages 313-317, June.
    20. Erin Baker, 2009. "Optimal Policy under Uncertainty and Learning about Climate Change: A Stochastic Dominance Approach," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 11(5), pages 721-747, October.

    More about this item

    Keywords

    dominance;

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-01161663. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.