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          Volume 11, Number 02, December 1986 >

Please use this identifier to cite or link to this item: http://purl.umn.edu/32243

Title: INTERPRETATIONS AND TRANSFORMATIONS OF SCALE FOR THE PRATT-ARROW ABSOLUTE RISK AVERSION COEFFICIENT: IMPLICATIONS FOR GENERALIZED STOCHASTIC DOMINANCE
Authors: Raskin, Rob
Cochran, Mark J.
Issue Date: 1986-12
Abstract: The Pratt-Arrow measure of absolute risk aversion, as defined by r(x)=-un(x)/u1(x), is well known to be invariant to linear transformations. However, this invariance property applies with respect to transformations of u and not with respect to arbitrary rescalings of the outcome variables, x. The effects of this misunderstanding has led to ambiguity in classifying attitudes by risk aversion coefficients. It is shown that inappropriate rescalings of the outcome variable can lead to inaccurate rankings produced by generalized stochastic dominance.
URI: http://purl.umn.edu/32243
Institution/Association: Western Journal of Agricultural Economics>Volume 11, Number 02, December 1986
Total Pages: 7
Language: English
From Page: 204
To Page: 210
Collections:Volume 11, Number 02, December 1986

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