Journal Title
Title of Journal: Theory Decis
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Abbravation: Theory and Decision
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Authors: Octave Jokung
Publish Date: 2012/10/31
Volume: 74, Issue: 1, Pages: 127-149
Abstract
This article analyzes the conditions under which any change in a multiplicative background risk induces a more cautious behavior We give necessary and sufficient conditions under which any change in the multiplicative background risk with respect to the Nthdegree stochastic dominance raises local risk aversion Surprisingly decreasing relative risk aversion of any order up to N in the sense of Pratt Econometrica 32122–136 1964 coupled with decreasing relative risk aversion in the sense of Ross Econometrica 49631–638 1981 are sufficient to guarantee an increase in local risk aversion after any deterioration of the multiplicative background risk thanks to the Nthdegree stochastic dominance We link our results concerning secondorder stochastic dominance with the concept of multiplicative risk vulnerability
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