Econometrica: May 1981, Volume 49, Issue 3

Some Stronger Measures of Risk Aversion in the Small and the Large with Applications<621:SSMORA>2.0.CO;2-G
p. 621-638

Stephen A. Ross

This paper argues that the traditional Arrow-Pratt measures of risk aversion are generally too weak for making comparisons between risky situations. A new stronger ordering is proposed, and it is applied to some canonical problems in insurance and finance, for which the Arrow-Pratt measures give ambiguous results.

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