Munich Personal RePEc Archive

Evolutionary Foundation for Heterogeneity in Risk Aversion

Heller, Yuval and NEHAMA, Ilan (2021): Evolutionary Foundation for Heterogeneity in Risk Aversion.

There is a more recent version of this item available.
[thumbnail of MPRA_paper_110454.pdf]

Download (541kB) | Preview


We examine evolutionary basis for risk aversion with respect to aggregate risk. We study populations in which agents face choices between aggregate risk and idiosyncratic risk. We show that the choices that maximize the long-run growth rate are induced by a heterogeneous population in which the least and most risk averse agents are indifferent between aggregate risk and obtaining its linear and harmonic mean for sure, respectively. Moreover, an approximately optimal behavior can be induced by a simple distribution according to which all agents have constant relative risk aversion, and the coefficient of relative risk aversion is uniformly distributed between zero and two.

Available Versions of this Item

Atom RSS 1.0 RSS 2.0

Contact us: mpra@ub.uni-muenchen.de

This repository has been built using EPrints software.

MPRA is a RePEc service hosted by Logo of the University Library LMU Munich.