Munich Personal RePEc Archive

Evolution Heritable Risk, and Skewness Loving

Heller, Yuval and Robson, Arthur (2019): Evolution Heritable Risk, and Skewness Loving. Forthcoming in: Theoretical Economics

This is the latest version of this item.

[img]
Preview
PDF
MPRA_paper_102280.pdf

Download (1MB) | Preview

Abstract

Our understanding of risk preferences can be sharpened by considering their evolutionary basis. Recently, Robatto and Szentes (2017) found that both aggregate risk and idiosyncratic risk generate the same growth rate in a continuous time setting. We introduce a new source of risk, which is correlated between agents in the same location, but is uncorrelated between agents in different locations. We show that this local risk induces a strictly higher growth rate. This shows that interdependence of risk and population structure have important implications in a continuous-time setting, and that natural selection induces individuals to prefer local risk.

Available Versions of this Item

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.