Risk Aversion Under Preference Uncertainty
Copyright policy )Risk Aversion Under Preference Uncertainty
We show that if an agent is uncertain about the precise form of his utility function, his actual relative risk aversion may depend on wealth even if he knows his utility function lies in the class of constant relative risk aversion (CRRA) utility functions. We illustrate the consequences of this result for optimal asset allocation: poor agents that are uncertain about their risk aversion parameter invest less in risky assets than wealthy investors with identical risk aversion uncertainty. © 2011 Elsevier Inc..
- VU Research Institutes, Tinbergen Institute Netherlands
- Stanford University United States
- Goethe University Frankfurt Germany
- Vrije Universiteit Amsterdam Netherlands
- Centro de Estudios Monetarios y Financieros Spain
330, Preference Uncertainty, asset allocation, Portfolio Selection, G11, Nutzenfunktion, Risk-taking, Portfolio-Management, ddc:330, risk-taking, Risk Aversion,Preference Uncertainty,Risk-taking,Asset Allocation, risk aversion, Risikoaversion, risk aversion, preference uncertainty, risk-taking, asset allocation, Risk Aversion, D81, D84, Entscheidung bei Unsicherheit, preference uncertainty, Asset Allocation, SDG 1 - No Poverty, Theorie, jel: jel:D81, jel: jel:D84, jel: jel:G11, ddc: ddc:330
330, Preference Uncertainty, asset allocation, Portfolio Selection, G11, Nutzenfunktion, Risk-taking, Portfolio-Management, ddc:330, risk-taking, Risk Aversion,Preference Uncertainty,Risk-taking,Asset Allocation, risk aversion, Risikoaversion, risk aversion, preference uncertainty, risk-taking, asset allocation, Risk Aversion, D81, D84, Entscheidung bei Unsicherheit, preference uncertainty, Asset Allocation, SDG 1 - No Poverty, Theorie, jel: jel:D81, jel: jel:D84, jel: jel:G11, ddc: ddc:330
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