The name is absent



follows.

Proposition 4 (homotheticity and nonhomotheticity)

(1) If an individual is risk averter of DRRA under LS condition, then the MS function is
non-homothetic function whose expansion path is strictly concave in
σ - μ axis.

(2) If an individual is risk averter of CRRA under LS condition, then the MS function is
homothetic.

(3) If an individual is risk averter that displays the combination of IRRA and DARA under
LS condition, then the MS function is non-homothetic function whose expansion path is
strictly convex in
σ - μ axis.

A flexible specification

The specification of MS approach under LS condition has been considered for each type of
risk aversion and then several MS functions have been proposed (see forms (6), (9), (10) and
(12)). They can be applied to empirical analysis, assuming that the agent displays the
corresponding type of risk aversion and the random payoffs it faces are restricted to the
distribution class that satisfies the LS condition. However, as pointed out by Sinn (1983) and
Meyer (1987), a wide range of EU-based economic models satisfies the LS condition owing
to the theoretical structures themselves, and in such models, the EU theory is interchangeable
with MS approach with no assumption imposed on vNM utility function. Therefore, a
particular type of risk aversion needs not to be imposed a priori. In order to exploit the MS
approach in empirical studies based on the LS class of economic models, we need to specify
MS function flexible enough to nest as many types of risk aversion as possible. As far as the
author knows, Saha (1997) is the first who tackled this flexible specification problem of the
MS function. He proposed a nonlinear mean-standard deviation (NLMS) model,

20



More intriguing information

1. The name is absent
2. Draft of paper published in:
3. The name is absent
4. The name is absent
5. The Role of Land Retirement Programs for Management of Water Resources
6. Spatial patterns in intermunicipal Danish commuting
7. INTERACTION EFFECTS OF PROMOTION, RESEARCH, AND PRICE SUPPORT PROGRAMS FOR U.S. COTTON
8. The name is absent
9. FDI Implications of Recent European Court of Justice Decision on Corporation Tax Matters
10. TWENTY-FIVE YEARS OF RESEARCH ON WOMEN FARMERS IN AFRICA: LESSONS AND IMPLICATIONS FOR AGRICULTURAL RESEARCH INSTITUTIONS; WITH AN ANNOTATED BIBLIOGRAPHY
11. Magnetic Resonance Imaging in patients with ICDs and Pacemakers
12. The name is absent
13. Evolution of cognitive function via redeployment of brain areas
14. GROWTH, UNEMPLOYMENT AND THE WAGE SETTING PROCESS.
15. Herman Melville and the Problem of Evil
16. The name is absent
17. The name is absent
18. Do imputed education histories provide satisfactory results in fertility analysis in the Western German context?
19. The name is absent
20. ¿Por qué se privatizan servicios en los municipios (pequeños)? Evidencia empírica sobre residuos sólidos y agua.