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| | Risk aversion - encyclopedia article about Risk aversion. |
 | | The notion of (constant) risk aversion has come under criticism from behavioral economics. | | | This measure has the advantage that it is still a valid measure of risk aversion, even if it changes from risk-averse to risk-loving, i.e. | | | Risk aversion occurs when a person is willing to accept a lower expected payoff In probability theory (and especially gambling), the expected value (or mathematical expectation) of a random variable is the sum of the probability of each possible outcome of the experiment multiplied by its payoff ("value"). |
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http://encyclopedia.thefreedictionary.com/Risk+aversion
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| | Risk Aversion, Risk Neutrality, Risk Seeking |
| | Between risk aversion and risk seeking is a state called risk neutrality. | | | The opposite of risk aversion is risk seeking (sometimes called risk loving). | | | However, risk seeking behavior is observable in actual life. |
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http://www.riskglossary.com/articles/risk_aversion.htm
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| | Y2K Bibliography - Individual Decisions: Risk, Uncertainty, and Biases |
| | Abstract: Data from individual choice experiments indicate that subjects are risk neutral or slightly risk averse in lottery-choice tasks, but data from interactive auctions and bargaining games suggest a higher degree of risk aversion. | | | Keywords: experiments, decisions, risk preference, risk aversion, risk aversion. | | | Abstract: The experiment is motivated by the need to measure a reference level in a financial market, in order to apply the predictions of prospect theory (risk seeking in losses and risk averse in gains from some reference point). |
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http://www.people.virginia.edu/~cah2k/decy2k.htm
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| | Sound aversion therapy applied to behavioural problems or training in dogs. |
| | Sound aversion therapy applied to behavioural problems or training in dogs. | | | Shock therapy is only justified when all else has failed and the problem is so serious that the dog's life would be at risk if not solved. | | | Please note that electric shock therapy (used in shock collars) is also aversion therapy, but please never use this technique. |
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http://www.dog-training-behaviour.com/sound_aversion_therapy.html
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| | Wayward and wagering: Orang Nakal and risk taking in rural east Java |
| | In local social security studies, peasants wishes and orientations on risk aversion and security are often taken for granted, although seldomly explicitly mentioned. | | | Taking these examples into account, it is questioned whether the assumption of risk-aversion in poorer households should be maintained. | | | The author concludes that deliberate risk taking is not just an exception in peasant societies but an attractive livelihood style for some villagers who search for an alternative to comply with village norms and social pressures urging for huge investments in social security and reciprocal relationships. |
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http://www.eldis.org/static/DOC11349.htm
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| | Risk-Benefit Analysis |
| | When individuals are exposed to involuntary risk, risk which they have no control, they make risk aversion their primary goal. | | | Projected risk, as analytically based on system models structured from historical studies. | | | We accept a certain level of risk in our lives as necessary to achieve certain benefits. |
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http://capita.wustl.edu/ME567_Informatics/concepts/riskben.html
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| | A Bird In The Hand? Proverbs Show Differering Cultural Views |
| | The participants were then asked if each proverb promoted risk aversion or risk seeking in two different situations: one financial and one social. | | | However, because of the importance of their social network, Chinese are less willing to take social risks in which they might alienate friends or family. | | | However, Weber said the evidence was clear that Chinese people believe proverbs advocate more risk seeking in financial situations than they do in social situations. |
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http://www.eurekalert.org/pub_releases/1998-11/OSU-ABIT-031198.php
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| | Does Risk Seeking Drive Asset Prices? A stochastic dominance analysis of aggregate investor preferences |
| | Our results suggest that Markowitz type utility functions, with risk aversion for losses and risk seeking for gains, can capture the cross-sectional pattern of stock returns. | | | "Testing for risk aversion: a stochastic dominance approach," Economics Letters, Elsevier, vol. | | | We use various existing and novel stochastic dominance criteria that account for the possibility that investors exhibit local risk seeking behavior. |
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http://www.ideas.uqam.ca/ideas/data/Papers/dgreureri2002203.html
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| | Taste aversion |
| | Predation Politics Conditioned taste aversion (CTA) and its uses in wildlife management problems. | | | A reduced, distorted, or lost sense of taste or smell represent serious risk factors for heart disease, diabetes, stroke, and other illnesses that require adherence to specific dietary regimens. | | | UConn Taste and Smell Center Our Taste and Smell Clinic uses a multidisciplinary approach to determine the etiology of a patient's taste and smell disorder. |
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http://www.serebella.com/encyclopedia/article-Taste_aversion.html
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| | The US dollar: risk and reward SCB Economic Update |
| | Trying to forecast when the market will eventually move from risk seeking to risk aversion is like trying to pick the top in the NASDAQ in 1999-2000. | | | These reflections of risk appetite have been in "risk-seeking" for some time. | | | A more constructive approach is to try and suggest likely triggers for an eventual reduction in risk appetite and the likely ramifications for global FX markets: |
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http://www.ameinfo.com/news/Detailed/55248.html
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| | AmexFnDictionary?pageid=display&titleid=3123 |
| | Constant absolute risk aversion and constant relative risk aversion both exhibit harmonic absolute risk aversion. | | | A description of risk aversion that holds investors' absolute risk tolerance (the reciprocal of risk aversion) increases linearly with wealth. | | | See also Constant Absolute Risk Aversion, Constant Relative Risk Aversion, Decreasing Absolute Risk Aversion, Decreasing Relative Risk Aversion, Increasing Absolute Risk Aversion, and Increasing Relative Risk Aversion. |
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http://www.amex.com/servlet/AmexFnDictionary?pageid=display&titleid=3123
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| | schmidt&zank.txt |
| | Strong risk aversion is a property which is model independent, i.e., it is defined in terms of preferences and not in terms of properties of the utility representation. | | | The classical measures of risk aversion established by Pratt (1964) and Arrow (1964) are based on the assumptions of EU where risk aversion is equivalent to concavity of the utility function. | | | While under the EU theory risk aversion is equivalent to a concave utility function, it has become clear that under the RDU concavity of the utility function is achieved only with strong risk aversion (Chew, Karni and Safra 1987, Chateauneuf and Cohen 1994). |
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http://www.huebnergeneva.org/documents/schmidt&zank.txt
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| | [nep-all] NEP-all-2003-04-27 |
| | However, the ensuing risk aversion measure (1-and#945;) should not be considered as a simple Arrow-Pratt index of relative risk aversion that could be interpreted independently of the level of the elasticity and#963;. | | | Therefore, risk aversion is now defined with respect to the unpredictable discrepancy between actual consumption and this reference level (a quantity independent of the attitude towards risk). | | | We find that relaxing fixed risk preferences yields estimates for relative risk aversion that are (i) reasonable by usual standards, (ii) correlated with both consumption and returns and (iii) indicative of an additional preference risk of holding the assets. |
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http://lists.repec.org/pipermail/nep-all/2003-April/000330.html
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| | Paper 97/2 Risking too much |
| | In this case, explicit representation of risk, risk aversion and/or tactical responses to risk may increase the credibility of the model sufficiently to warrant the effort involved, irrespective of their impact on the value of the results. | | | Although risk aversion coefficients of Syrian farmers have not been estimated, on the basis of other studies in developing countries (e.g., Antle, 1987; Binswanger, 1980) we would expect that for most Syrian farmers the cost of ignoring risk aversion when selecting a plan would be less than one percent. | | | In some studies, the impact of risk aversion on optimal management is exaggerated by (a) using unrealisticly high risk aversion coefficients, (b) failure to represent farm constraints and technology realistically (Musser, McCarl, and Smith), and/or (c) modelling individual enterprises without considering their degree of correlation with other enterprises or decisions. |
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http://www.general.uwa.edu.au/u/dpannell/dpap972f.htm
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| | Theory of Risk Aversion |
| | We first turn to the concept of univariate "risk aversion" which, intuitively, implies that when facing choices with comparable returns, agents tend chose the less-risky alternative, a construction we owe largely to Milton Friedman and Leonard J. Savage (1948). | | | Constant absolute risk aversion (CARA) and increasing absolute risk aversion (IARA) are defined analogously by replacing the appropriate inequalities. | | | M.J. Machina and W.S. Neilson (1987) "The Ross Characterization of Risk Aversion: Strengthening and extension", Econometrica, Vol. |
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http://cepa.newschool.edu/het/essays/uncert/aversion.htm
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| | Department of Finance |
| | Constant relative risk aversion over SandP500 return states is rejected in favor of a model in which relative risk aversion is stochastic. | | | Empirical relative risk aversion over equity return states is found to be positively autocorrelated and positively correlated with the spread between implied and objective volatilities. | | | In addition, the constant relative risk aversion (power utility) pricing kernel is found to underestimate the value of payoffs in large negative return states. |
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http://www.stern.nyu.edu/fin/workpapers/papers99/wpa99014.htm
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| | Theory of Risk Aversion |
| | We first turn to the concept of univariate "risk aversion" which, intuitively, implies that when facing choices with comparable returns, agents tend chose the less-risky alternative, a construction we owe largely to Milton Friedman and Leonard J. Savage (1948). | | | The Arrow-Pratt risk-premium we paid to avoid the extra risk in state 1 is only a local risk-premium and is not a good measure of risk-aversion. | | | Let us now turn to verifying Arrow's (1965) hypothesis, namely that if we have decreasing absolute risk aversion (DARA) and increasing relative risk aversion (IRRA) with respect to wealth, then optimal holdings of risky assets increase with wealth but the proportion of wealth invested in assets declines. |
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http://cepa.newschool.edu/het/essays/uncert/aversion.htm
(6248 words)
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| | Theory of Risk Aversion |
| | We first turn to the concept of univariate "risk aversion" which, intuitively, implies that when facing choices with comparable returns, agents tend chose the less-risky alternative, a construction we owe largely to Milton Friedman and Leonard J. Savage (1948). | | | Thus, an alternative would be to weight the measure of risk aversion by the level of wealth, x. | | | M.J. Machina and W.S. Neilson (1987) "The Ross Characterization of Risk Aversion: Strengthening and extension", Econometrica, Vol. |
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http://cepa.newschool.edu/het/essays/uncert/aversion.htm
(6248 words)
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| | Risk Aversion, Risk Neutrality, Risk Seeking |
| | Between risk aversion and risk seeking is a state called risk neutrality. | | | The opposite of risk aversion is risk seeking (sometimes called risk loving). | | | An investor is said to be risk averse if he prefers less risk to more risk, all else being equal. |
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http://www.riskglossary.com/articles/risk_aversion.htm
(235 words)
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| | Risk Aversion, Risk Neutrality, Risk Seeking |
| | Between risk aversion and risk seeking is a state called risk neutrality. | | | The opposite of risk aversion is risk seeking (sometimes called risk loving). | | | An investor is said to be risk averse if he prefers less risk to more risk, all else being equal. |
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http://www.riskglossary.com/articles/risk_aversion.htm
(235 words)
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| | Sovereign debt and loss aversion |
| | Then, I estimate loss aversion and risk aversion parameters in a simple framework by GMM. | | | Moreover, they require a risk premium on sovereign bonds which is too high to be explained by a reasonable degree of risk aversion (bond premium puzzle). | | | The estimated coefficient of loss aversion is significant and quite close to the estimates obtained by other authors. |
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http://escholarship.bc.edu/dissertations/AAI3142882
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| | UC-Berkeley, Dept of Economics Working Paper Series Abstracts |
| | Abstract: Within the expected-utility framework, the only explanation for risk aversion is that the utility function for wealth is concave: A person has lower marginal utility for additional wealth when she is wealthy than when she is poor. | | | This paper provides a theorem showing that expected-utility theory is an utterly implausible explanation for appreciable risk aversion over modest stakes: Within expected-utility theory, for any concave utility function, even very little risk aversion over modest stakes implies an absurd degree of risk aversion over large stakes. | | | "Risk Aversion and Expected-Utility Theory: A Calibration Theorem" Matthew Rabin. |
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http://haas.berkeley.edu/groups/iber/wps/econabs.html
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| | AmexFnDictionary?pageid=display&titleid=5127 |
| | Constant relative risk aversion implies that the percentage of wealth one is willing to expose to risk remains unchanged as wealth increases. | | | Decreasing relative risk aversion indicates that the percentage of wealth one is willing to expose to risk increases with wealth. | | | Increasing relative risk aversion means that the percentage of wealth one is willing to expose to risk falls as wealth increases. |
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http://www.amex.com/servlet/AmexFnDictionary?pageid=display&titleid=5127
(234 words)
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| | Risk and Time |
| | In Economics the classic way to measure this notion of "risk aversion" is by using "utility functions." A utility function gives us a way to measure an investor's relative preference for different levels of wealth and to measure his willingness to undertake different amounts of risk in the hope of attaining greater wealth. | | | Indeed, constant relative risk aversion is often used as a neutral benchmark against which investor's attitudes towards risk and wealth are measured. | | | As we saw in the previous section, for iso-elastic utility functions with constant relative risk aversion, risk is independent of time, in the sense that the optimal asset allocation is the same at all time horizons. |
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http://homepage.mac.com/j.norstad/finance/risk-and-time.html
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| | AMS Acta - Indexation Rules, Risk Aversion, and Imperfect Information |
| | Risk aversion makes for endogenous indexation arrangements, which deliver partial indexation as they exploit imperfect inflation indices; risk aversion also generates a positive correlation between indexation and inflation variance. | | | AMS Acta - Indexation Rules, Risk Aversion, and Imperfect Information | | | ( 2003) Indexation Rules, Risk Aversion, and Imperfect Information. |
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http://amsacta.cib.unibo.it/archive/00000640
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| | Glossary of research economics |
| | coefficient of relative risk aversion: This is a measure of the responsiveness to risk implied by a utility function of consumption, for each consumption level. | | | coefficient of absolute risk aversion: This is a measure of the responsiveness to risk implied by a utility function of consumption, for each consumption level. | | | The coefficient of absolute risk aversion is a; thus the abbreviation CARA for Constant Absolute Risk Aversion. |
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http://econterms.com/econtent.html
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| | assetp~3.doc |
| | Constant relative risk aversion for u(W), when W is of the form W = W0((Rs + (1-()Rb), implies that the share of wealth allocated to risky and riskless assets does not vary with changes in initial wealth. | | | The risk aversion level necessary to explain the premium earned from assuming risk is in conflict with the rate of time preference needed to explain the risk free return and the growth of consumption over time. | | | A range of relative risk aversion levels for the implied u(W) is found to be consistent with (to not reject) the asset pricing equations, and the lowest magnitudes not leading to rejection are near one. |
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http://www.msu.edu/user/jmeyer/assetp~3.doc
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| | GARP : Risk News : Risk eNews Article |
| | Moderate levels of risk aversion are consistent with Goldmans consistent and constructive view on both equities and high yield. | | | The Goldman Sachs Risk Aversion Index (RAI) continues to hover in risk-neutral territory, with a September RAI reading of 5.17, compared to 5.82 in August and 5.36 in September 2003. | | | A higher index reflects higher risk aversion and therefore, less willingness to invest in risky assets. |
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http://www.garp.com/risknews/newsfeed.asp?Category=6&MyFile=2004-10-07-9512.html
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