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DE FINETTI ON RISK AVERSION

Published online by Cambridge University Press:  01 July 2009

Joseph B. Kadane  and
Gaia Bellone
Joseph B. Kadane
Affiliation:
Carnegie Mellon University
Gaia Bellone
Affiliation:
Carnegie Mellon University
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Abstract

According to Mark Rubinstein (2006) ‘In 1952, anticipating Kenneth Arrow and John Pratt by over a decade, he [de Finetti] formulated the notion of absolute risk aversion, used it in connection with risk premia for small bets, and discussed the special case of constant absolute risk aversion.’ The purpose of this note is to ascertain the extent to which this is true, and at the same time, to correct certain minor errors that appear in de Finetti's work.

Type
Essay
Information
Economics & Philosophy , Volume 25 , Issue 2 , July 2009 , pp. 153 - 159
Copyright
Copyright © Cambridge University Press 2009

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References

REFERENCES

Arrow, K. 1971. Essays in the Theory of Risk-Bearing. Amsterdam: North Holland Publishing Company.Google Scholar
de Finetti, B. 1940. The Problem of ‘Full-Risk Insurances’. Journal of Investment Management 4: 19–43. Translation by Luca Barone (2006).Google Scholar
de Finetti, B. 1952. Sulla preferibilità. Giornale degli Economisti e Annali di Economia 11: 685–709.Google Scholar
Markovitz, H. 1952. Portfolio selection. Journal of Finance 7: 77–91.Google Scholar
Markovitz, H. 2006. de Finetti scoops Markovitz. Journal of Investment Management 4: 5–18.Google Scholar
Pratt, J. 1964. Risk aversion in the small and in the large. Econometrica 32: 122–36.CrossRefGoogle Scholar
Rubinstein, M. 2006. Bruno de Finetti and mean-variance portfolio selection. Journal of Investment Management 4: 3–4.Google Scholar