The Demand for a Risky Asset: Signing, Jointly and Separately, the Effects of Three Distributional Shifts

12 Pages Posted: 20 May 2005

See all articles by Thomas Paulsson

Thomas Paulsson

Jonkoping University - Jonkoping International Business School (JIBS)

Robert Sproule

Bishop's University - Department of Economics

Andreas Wagener

Leibniz Universität Hannover - Economics and Business Administration Area; CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Vienna University of Economics and Business Administration

Abstract

We show that, if an individual's utility function exhibits a degree of relative temperance smaller than one, the individual will react, in a plausible way, to each of three common shifts in the stochastic distribution of his wealth, namely to FSD shifts, mean-preserving spreads and increases in downside risk. First, we derive, in a unified setting, necessary and sufficient conditions for signing the comparative-static effects of each of these shifts separately, and, second, we invoke implications of the property of mixed risk aversion to merge these separate conditions into a single sufficient condition for jointly signing all comparative-static effects.

Suggested Citation

Paulsson, Thomas and Sproule, Robert and Wagener, Andreas, The Demand for a Risky Asset: Signing, Jointly and Separately, the Effects of Three Distributional Shifts. Metroeconomica, Vol. 56, No. 2, pp. 221-232, May 2005, Available at SSRN: https://ssrn.com/abstract=725913

Thomas Paulsson

Jonkoping University - Jonkoping International Business School (JIBS) ( email )

Jönköping, 55111
Sweden

Robert Sproule

Bishop's University - Department of Economics ( email )

Lennoxville, Quebec J1M1Z7
Canada
819-822-9600 Ext. 2480 (Phone)

Andreas Wagener (Contact Author)

Leibniz Universität Hannover - Economics and Business Administration Area ( email )

Koenigsworther Platz 1
30167 Hannover
Germany

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Vienna University of Economics and Business Administration ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

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