کد مقاله | کد نشریه | سال انتشار | مقاله انگلیسی | نسخه تمام متن |
---|---|---|---|---|
958219 | 928911 | 2009 | 14 صفحه PDF | دانلود رایگان |
![عکس صفحه اول مقاله: Properties of the utility function: A market-based analysis Properties of the utility function: A market-based analysis](/preview/png/958219.png)
Using US market data, this paper sheds new empirical light on properties of the utility function. In particular, employing theoretical relations between Stochastic Discount Factors, state prices, and state probabilities, we are successful in recovering the following four functions: (i) Absolute Risk Aversion (ARA); (ii) Absolute Risk Tolerance (ART); (iii) Absolute Prudence (AP); and (iv) Absolute Temperance (AT). Our statistical analysis points out, unequivocally, that the ARA function is decreasing and convex, the ART function is convex, AT is greater than ARA, and the AP function is not decreasing. These empirical results are analyzed in light of established theory concerning, inter-alia, precautionary saving and prudence as well as the way risk attitudes are affected by the presence of “background risks” and by investors’ investment horizon.
Journal: Journal of Economics and Business - Volume 61, Issue 6, November–December 2009, Pages 495–508