Optimal portfolio choice for investors with industry-specific labor income risks

Tsai, Hui Ju; Wu, Yangru

doi:10.1016/j.frl.2014.07.004

Cited by 6 publications

(1 citation statement)

References 14 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…To that end, it is worthwhile to consider at least two other CRRA functions, one less risk averse and another more risk averse than the log utility case. The general CRRA utility form is extremely common for empirical estimation problems, including for experimental work (for a recent example, of portfolio choice under labor risk, see Tsay and Wu, 2014). The general CRRA utility form is:…”

Section: Risk Premium With Large Risksmentioning

confidence: 99%

A new approximation for the risk premium with large risks

Watt

Gunby

2021

JRF

View full text Add to dashboard Cite

PurposeThe Arrow–Pratt approximation to the risk premium is only valid for small risks. In this paper we consider a second approximation, based on risk-neutral probabilities and which requires no greater information than the Arrow–Pratt approximation, that works well for both small and large risks.Design/methodology/approachThe paper is theoretical in nature, although it also provides illustrative numerical simulations.FindingsThe new approximation proposed here appears to be significantly superior to Arrow–Pratt for approximating the true value of the risk premium when the risk is large. It may also approximate better even for relatively small risks.Originality/valueAs far as we are aware, there are no other known approximations for the risk premium when the risk involved is large.

show abstract

Section: Risk Premium With Large Risksmentioning

confidence: 99%

A new approximation for the risk premium with large risks

Watt

Gunby

2021

JRF

View full text Add to dashboard Cite

show abstract

Pure higher-order effects in the portfolio choice model

Ñíguez

Paya

Peel

2016

Finance Research Letters

View full text Add to dashboard Cite

This paper examines the e¤ects of higher-order risk attitudes and statistical moments on the optimal allocation of risky assets within the standard portfolio choice model. We derive the expressions for the optimal proportion of wealth invested in the risky asset to show they are functions of portfolio returns third-and fourth-order moments as well as on the investor's risk preferences of prudence and temperance. We illustrate the relative importance that the introduction of those higher-order e¤ects have in the decision of expected utility maximizers using data for the US.JEL classi…cation: C14, G11.

show abstract

Expected Shortfall, spectral risk measures, and the aggravating effect of background risk, or: risk vulnerability and the problem of subadditivity

Brandtner

2018

Journal of Banking & Finance

View full text Add to dashboard Cite

Optimal portfolio choice for investors with industry-specific labor income risks

Cited by 6 publications

References 14 publications

A new approximation for the risk premium with large risks

A new approximation for the risk premium with large risks

Pure higher-order effects in the portfolio choice model

Expected Shortfall, spectral risk measures, and the aggravating effect of background risk, or: risk vulnerability and the problem of subadditivity

Contact Info

Product

Resources

About