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A Note on Risk Aversion and Indifference Curves

Published online by Cambridge University Press:  19 October 2009

Yakov Amihud
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Extract

In his recent paper in this Journal, Miller [3] proposed, following Adler's results [1], that “the investor exhibits decreasing absolute risk aversion with respect to expected wealth if, as increased holding σ constant, the slope of the indifference loci decreases” [3, p. 301]. He further attempted to have shown that in general the sign of () is the same as the sign of r'(W) (the derivative of the absolute risk aversion measure), but this is not proved.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 12 , Issue 3 , September 1977 , pp. 509 - 513
Copyright
Copyright © School of Business Administration, University of Washington 1977

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References

REFERENCES

[1]Adler, M. “On the Risk-Return Trade-off in the Valuation of Assets.” Journal of Financial and Quantitative Analysis, Vol. 4 (December 1969), pp. 493–512.CrossRefGoogle Scholar
[2]Arrow, K. J.Aspects of the Theory of Risk-Bearing. Helsinki: Academic Bookstore, 1965.Google Scholar
[3]Miller, S. “Measures of Risk Aversion: Some Clarifying Comments.” Journal of Financial and Quantitative Analysis, Vol. 10 (June 1975), pp. 299–309.Google Scholar
[4]Sandmo, A. “On the Theory of the Competitive Firm under Price Uncertainty.” American Economic Review (March 1971), pp. 65Google Scholar