Journal ArticleDOI
The Efficiency Analysis of Choices Involving Risk
Giora Hanoch,Haim Levy +1 more
TLDR
In this paper, an analysis of the first step of the decision-making process of an individual decision maker among alternative risky ventures is presented, in terms of a single dimension such as money, both for the utility functions and for the probability distributions.Abstract:
Publisher Summary The choice of an individual decision maker among alternative risky ventures may be regarded as a two-step procedure. The decision maker chooses an efficient set among all available portfolios, independently of his tastes or preferences. Then, the decision maker applies individual preferences to this set to choose the desired portfolio. The subject of this chapter is the analysis of the first step. It deals with optimal selection rules that minimize the efficient set by discarding any portfolio that is inefficient in the sense that it is inferior to a member of the efficient set, from point of view of each and every individual, when all individuals' utility functions are assumed to be of a given general class of admissible functions. The analysis presented in the chapter is carried out in terms of a single dimension such as money, both for the utility functions and for the probability distributions. However, the results may easily be extended, with minor changes in the theorems and the proofs, to the multivariate case. The chapter explains a necessary and sufficient condition for efficiency, when no further restrictions are imposed on the utility functions. It presents proofs of the optimal efficiency criterion in the presence of general risk aversion, that is, for concave utility functions.read more
Citations
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Book ChapterDOI
Introduction: Applied Economics of Information and Risk
Moriki Hosoe,Iltae Kim +1 more
TL;DR: In this paper, the authors examine various hot topics of applied economy from the point of the view of the economics of information and risk, and examine how information and risks issues affect the behavior of economic entities and transactions between economic agents.
Book ChapterDOI
The Empirical Studies
TL;DR: In this article, the FSD rule is shown to be ineffective in that the resultant efficient set may not be much smaller than the feasible set, and the larger the number of assumptions (e.g., risk aversion, decreasing absolute risk aversion), the smaller the induced efficient set.
Journal ArticleDOI
Misuse and optimum inspecting strategy in agency problems
Benzion Barlev,Haim Levy +1 more
TL;DR: In this article, the authors analyzed the optimal audit inspecting strategy and the agent's decision about a theft taking into account not only the probability of benefiting from the stolen assets but also the risk of being penalized if caught.
Journal ArticleDOI
Fraction-Degree Reference Dependent Stochastic Dominance
TL;DR: In this paper , a fractional degree reference dependent stochastic dominance rule is developed which is a generalization of the integer degree reference-dependent Stochastic Dominance Rule.
Journal ArticleDOI
Putting the Aumann–Serrano Riskiness Index to work
TL;DR: In this paper , the convergence order of the Aumann-Serrano riskiness index to its stable value is estimated using the moment generating function (MGF) and the standard deviation.
References
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Journal ArticleDOI
Capital asset prices: a theory of market equilibrium under conditions of risk*
TL;DR: In this paper, the authors present a body of positive microeconomic theory dealing with conditions of risk, which can be used to predict the behavior of capital marcets under certain conditions.
Journal ArticleDOI
The Utility Analysis of Choices Involving Risk
TL;DR: In this paper, the authors suggest that an important class of reactions of individuals to risk can be rationalized by a rather simple extension of orthodox utility analysis, i.e., individuals frequently must, or can, choose among alternatives that differ, among other things, in the degree of risk to which the individual will be subject.
Journal ArticleDOI
The Existence of Probability Measures with Given Marginals
TL;DR: In this article, the existence of probability distributions with given marginals is studied under typically weaker assumptions, than those which are required by the use of Theorem 1, and necessary and sufficient conditions for a sequence of probability measures to be the sequence of distributions of a martingale, an upper semi-martingale or of partial sums of independent random variables.