Linear-Risk-Tolerant, Invariant Risk Preferences

Quiggin and Chambers have introduced the notion of invariant preferences, and shown that the only invariant expected-utility functionals are those associated with a quadratic utility function. This note identifies the class of preferences which simultaneously satisfy invariance, two-fund portfolio separation, and linear risk tolerance to determine if there exist meaningful classes of preferences, which inherit much of the quadratic family's theoretical and empirical tractability, but do not necessarily inherit its more unattractive properties when regarded as preferences over wealth.


Issue Date:
Apr 12 2004
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/151162
Total Pages:
12
JEL Codes:
D81
Series Statement:
Risk and Uncertainty Program
3/R04




 Record created 2017-04-01, last modified 2017-08-27

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