Article ID: | iaor2013618 |
Volume: | 74 |
Issue: | 2 |
Start Page Number: | 267 |
End Page Number: | 284 |
Publication Date: | Feb 2013 |
Journal: | Theory and Decision |
Authors: | Ebert Sebastian |
Keywords: | risk, statistics: distributions |
This article presents a characterization of higher‐order risk preferences such as prudence or temperance in terms of statistical moments. Our results, which are generalizations of Roger (2011) and Ekern (1980), give a better understanding of how higher‐order risk preferences relate to skewness preference and kurtosis aversion. While they are not based on expected utility theory, an implication within that theory is that all commonly used utility functions exhibit skewness preference and kurtosis aversion.