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Risk Aversion, Background Risk, and the Pricing Kernel

Ser-Huang Poon and Richard Stapleton

in Asset Pricing in Discrete Time: A Complete Markets Approach

Published in print:
2005
Published Online:
July 2005
ISBN:
9780199271443
eISBN:
9780191602559
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/0199271445.003.0002
Subject:
Economics and Finance, Financial Economics

‘Risk Aversion, background Risk, and the Pricing Kernel’ looks in more detail at utility functions and their effect on the shape of the pricing kernel. The authors discuss the meaning of risk ... More


The Impact of Health Status and Out‐of‐Pocket Medical Expenditures on Annuity Valuation

Cassio M. Turra and Olivia S. Mitchell

in Recalibrating Retirement Spending and Saving

Published in print:
2008
Published Online:
January 2009
ISBN:
9780199549108
eISBN:
9780191720734
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/acprof:oso/9780199549108.003.0010
Subject:
Business and Management, Pensions and Pension Management

This chapter describes how differences in health status at retirement can influence the decision to purchase a life annuity. It extends previous research on annuitization decisions by incorporating ... More


Preferences, Risk, and Stochastic Dominance

James Bergin

in Microeconomic Theory: A Concise Course

Published in print:
2005
Published Online:
July 2005
ISBN:
9780199280292
eISBN:
9780191602498
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/0199280290.003.0002
Subject:
Economics and Finance, Microeconomics

Focuses on preferences, attitude to risk and the ranking of risky returns. The state space model is discussed and related to risk aversion. First, second, and higher order stochastic dominance ... More


Myopic Portfolio Choice

John Y. Campbell and Luis M. Viceira

in Strategic Asset Allocation: Portfolio Choice for Long-Term Investors

Published in print:
2002
Published Online:
November 2003
ISBN:
9780198296942
eISBN:
9780191596049
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/0198296940.003.0002
Subject:
Economics and Finance, Financial Economics

Reviews the theory of portfolio choice for short‐term investors, and explains the special cases in which long‐term investors should make the same choices as short‐term investors. When investors’ ... More


Decision Making Processes and the Rate and Direction of Innovation *

David J. Teece

in Managing Intellectual Capital: Organizational, Strategic, and Policy Dimensions

Published in print:
2002
Published Online:
November 2003
ISBN:
9780198295426
eISBN:
9780191596964
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/0198295421.003.0004
Subject:
Economics and Finance, Microeconomics

The reluctance to introduce competency‐destroying innovations may be understood as a product of the decision‐making biases of many large firms; some large firms tend to lose their ability and desire ... More


A Theory of the Decreasing Term Structure of Discount Rates

Christian Gollier

in Pricing the Planet's Future: The Economics of Discounting in an Uncertain World

Published in print:
2012
Published Online:
October 2017
ISBN:
9780691148762
eISBN:
9781400845408
Item type:
chapter
Publisher:
Princeton University Press
DOI:
10.23943/princeton/9780691148762.003.0008
Subject:
Economics and Finance, Development, Growth, and Environmental

This chapter aims to provide a unified theoretical foundation to the term structure of discount rates. To do this the chapter develops a benchmark model based on two assumptions: individual ... More


Environmental Policy Instruments and Institutions in Developing Countries

López Ramón and Michael A. Toman

in Economic Development and Environmental Sustainability: New Policy Options

Published in print:
2006
Published Online:
September 2006
ISBN:
9780199298006
eISBN:
9780191603877
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/0199298009.003.0008
Subject:
Economics and Finance, Development, Growth, and Environmental

The failure of public good provision in developing countries implies that many environmental and natural resource allocation problems that have been solved in developed countries, such as water ... More


Preferences

Claus Munk

in Financial Asset Pricing Theory

Published in print:
2013
Published Online:
May 2013
ISBN:
9780199585496
eISBN:
9780191751790
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/acprof:oso/9780199585496.003.0005
Subject:
Economics and Finance, Econometrics

Asset prices are ultimately determined by the asset supply and demand of individuals and to study that we need to model the preferences of individuals. This chapter presents alternative ... More


Advanced Consumption-Based Asset Pricing

Claus Munk

in Financial Asset Pricing Theory

Published in print:
2013
Published Online:
May 2013
ISBN:
9780199585496
eISBN:
9780191751790
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/acprof:oso/9780199585496.003.0009
Subject:
Economics and Finance, Econometrics

Ch. 8 illustrated that the simple CRRA-lognormal consumption-based asset pricing model cannot match stylized empirical facts. This chapter presents a number of extensions of the simple model that ... More


Investing Over the Life Cycle

John Y. Campbell and Luis M. Viceira

in Strategic Asset Allocation: Portfolio Choice for Long-Term Investors

Published in print:
2002
Published Online:
November 2003
ISBN:
9780198296942
eISBN:
9780191596049
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/0198296940.003.0007
Subject:
Economics and Finance, Financial Economics

This chapter uses a life‐cycle model calibrated to microeconomic US data to examine financial asset allocation strategies of working households saving for retirement. For typical US households with ... More


Uncertainty, Insurance, and Social Norms

Partha Dasgupta

in An Inquiry into Well-Being and Destitution

Published in print:
1995
Published Online:
November 2003
ISBN:
9780198288350
eISBN:
9780191596094
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/0198288352.003.0010
Subject:
Economics and Finance, Development, Growth, and Environmental

This chapter introduces the factor of environmental uncertainty into the consideration of resource allocation mechanisms. It has seven sections: (1) environmental uncertainty; (2) choice under ... More


Auctions I: Independent Values

James Bergin

in Microeconomic Theory: A Concise Course

Published in print:
2005
Published Online:
July 2005
ISBN:
9780199280292
eISBN:
9780191602498
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/0199280290.003.0007
Subject:
Economics and Finance, Microeconomics

Auctions with independent values are described. Detailed calculations of equilibrium strategies are given for the standard auctions (first price, second price, and so on.) The fundamental revenue ... More


Preferences

Andrew Ang

in Asset Management: A Systematic Approach to Factor Investing

Published in print:
2014
Published Online:
August 2014
ISBN:
9780199959327
eISBN:
9780199382323
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/acprof:oso/9780199959327.003.0002
Subject:
Economics and Finance, Financial Economics

Investors generally dislike the risk of losses during bad times. Optimal portfolio choice trades off these risks with the potential of returns. While mean-variance utility treats gains and losses ... More


State‐Dependent Utility

Edi Karni

in The Handbook of Rational and Social Choice

Published in print:
2009
Published Online:
May 2009
ISBN:
9780199290420
eISBN:
9780191710506
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/acprof:oso/9780199290420.003.0010
Subject:
Economics and Finance, Public and Welfare

This chapter reviews the foundational issues raised when the evaluation of consequences is state‐dependent and discusses the various approaches to addressing them. In addition, exposes the theory of ... More


Why Obesity? An Economic Perspective

Mario Mazzocchi, W. Bruce Traill, and Jason F. Shogren

in Fat Economics: Nutrition, Health, and Economic Policy

Published in print:
2009
Published Online:
October 2011
ISBN:
9780199213856
eISBN:
9780191695902
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/acprof:oso/9780199213856.003.0003
Subject:
Economics and Finance, Public and Welfare

This chapter explores the economic perspective of obesity and tries to understand what makes people eat more than they should or choose bad diets. It explains the role of an economist to help ... More


Collusion and Decentralization

Jean‐Jacques Laffont

in Incentives and Political Economy

Published in print:
2001
Published Online:
November 2003
ISBN:
9780199248681
eISBN:
9780191596575
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/0199248680.003.0009
Subject:
Economics and Finance, Microeconomics

This chapter models the optimal degree of delegation and centralization of government as the degree of availability of communication between periphery and centre in a hierarchy. Under bounded ... More


Concepts of Macroeconomic Risk Management

Lars Oxelheim and Clas Wihlborg

in Corporate Decision-Making with Macroeconomic Uncertainty: Performance and Risk Management

Published in print:
2008
Published Online:
May 2009
ISBN:
9780195335743
eISBN:
9780199868964
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/acprof:oso/9780195335743.003.0002
Subject:
Economics and Finance, Financial Economics

This chapter reviews concepts of risk and economic arguments for risk management from the perspective of different stakeholder groups. The interests of different groups are reviewed and it is ... More


Introduction

John Y. Campbell and Luis M. Viceira

in Strategic Asset Allocation: Portfolio Choice for Long-Term Investors

Published in print:
2002
Published Online:
November 2003
ISBN:
9780198296942
eISBN:
9780191596049
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/0198296940.003.0001
Subject:
Economics and Finance, Financial Economics

The mean‐variance paradigm has the strong implication that all investors should hold risky assets in the same proportion. Financial planners typically advise conservative investors to tilt their ... More


Community Structure, Mobility, and the Strength of Norms in an African Society: The Sangu of Tanzania

Richard McElreath

in Foundations of Human Sociality: Economic Experiments and Ethnographic Evidence from Fifteen Small-Scale Societies

Published in print:
2004
Published Online:
January 2005
ISBN:
9780199262052
eISBN:
9780191601637
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/0199262055.003.0011
Subject:
Economics and Finance, Microeconomics

Ultimatum Game results are presented from an African society, the Sangu of the Usangu Plains southwest Tanzania, with substantial internal economic variation. The study involved two communities: a ... More


Utility and Risk Aversion

Kerry E. Back

in Asset Pricing and Portfolio Choice Theory

Published in print:
2017
Published Online:
May 2017
ISBN:
9780190241148
eISBN:
9780190241179
Item type:
chapter
Publisher:
Oxford University Press
DOI:
10.1093/acprof:oso/9780190241148.003.0001
Subject:
Economics and Finance, Financial Economics

Expected utility is introduced. Risk aversion and its equivalence with concavity of the utility function (Jensen’s inequality) are explained. The concepts of relative risk aversion, absolute risk ... More


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