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Article Dans Une Revue Theory and Decision Année : 2015

Risk aversion, prudence, and asset allocation: a review and some new developments

Résumé

In this paper, we consider the composition of an optimal portfolio made of two dependent risky assets. The investor is first assumed to be a risk-averse expected utility maximizer, and we recover the existing conditions under which all these investors hold at least some percentage of their portfolio in one of the assets. Then, we assume that the decision maker is not only risk-averse, but also prudent and we obtain new minimum demand conditions as well as intuitively appealing interpretations for them. Finally, we consider the general case of investor’s preferences exhibiting risk apportionment of any order and we derive the corresponding minimum demand conditions. As a byproduct, we obtain conditions such that an investor holds either a positive quantity of one of the assets (positive demand condition) or a proportion greater than 50 % (i.e., the “50 % rule”).
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Dates et versions

hal-01533550 , version 1 (06-06-2017)

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Michel M. Denuit, Louis Eeckhoudt. Risk aversion, prudence, and asset allocation: a review and some new developments. Theory and Decision, 2015, 80 (2), pp.227--243. ⟨10.1007/s11238-015-9503-2⟩. ⟨hal-01533550⟩
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