Abstract
Building on the isomorphism between the theories of risk aversion and precautionary saving, an objective index of prudent behavior is introduced, which generalizes the riskiness index set forth by Aumann and Serrano (2008). A benchmark framework for the monotone relation between risk aversion and prudence results, in which absence of level effects and stochastic dominance of shocks are crucial, and generalized risk measures enable us to embed the fundamental result set forth by Menegatti (2007). Effective maps of completely proper rationality (Mantovi, 2013) enable one to parametrize departure from our benchmark framework in terms of level effects which preserve the positive effect of absolute risk aversion on absolute prudence.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
