https://scholars.lib.ntu.edu.tw/handle/123456789/414448
Title: | Increase in risk and saving behavior | Authors: | Tzeng L.Y. Wang J.-H. |
Keywords: | Central risk dominance;Increase in risk;Saving;Stochastic dominance | Issue Date: | 2004 | Journal Volume: | 56 | Journal Issue: | 5 | Start page/Pages: | 405-414 | Source: | Journal of Economics and Business | Abstract: | This paper extends the traditional unambiguous comparative statics analysis of an increase in risk into the case where individual's utility is a function of two goods rather than of a payoff only. Specifically, we use saving behavior to demonstrate the application of the extension. We find that a first-order stochastic dominance of rate of return causes a nonsatiable and risk-averse borrower to increase his borrowing. A mean-preserving second-order stochastic dominance of rate of return causes a borrower, who is risk-averse and prudent, to decrease his borrowing. Furthermore, we find that a stronger central risk dominance leads a nonsatiable and risk-averse lender to decrease his saving. Last, for the mean-preserving CDF shifts, we give a necessary and sufficient condition for all risk-averse lenders (respectively, borrowers) to decrease their saving (respectively, borrowing). ? 2004 Elsevier Inc. All rights reserved. |
URI: | https://scholars.lib.ntu.edu.tw/handle/123456789/414448 | ISSN: | 01486195 | DOI: | 10.1016/j.jeconbus.2004.01.004 |
Appears in Collections: | 財務金融學系 |
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