Template-Type: ReDIF-Paper 1.0 Series: Tinbergen Institute Discussion Papers Creation-Date: 2010-11-29 Number: 10-117/2/DSF 4 Author-Name: Roman Kraeussl Author-Workplace-Name: VU University Amsterdam Author-Name: Andre Lucas Author-Workplace-Name: VU University Amsterdam Author-Name: Arjen Siegmann Author-Workplace-Name: VU University Amsterdam Title: Risk Aversion under Preference Uncertainty Abstract: This discussion paper resulted in a publication in 'Finance Research Letters', 2012, 9(1), 1-7.

We show that if an agent is uncertain about the precise form of his utility function, his actual relative risk aversion may depend on wealth even if he knows his utility function lies in the class of constant relative risk aversion (CRRA) utility functions. We illustrate the consequences of this result for asset allocation: poor agents that are uncertain about their risk aversion parameter invest less in risky assets than wealthy investors with identical risk aversion uncertainty. Classification-JEL: D81, D84, G11 Keywords: risk aversion, preference uncertainty, risk-taking, asset allocation File-Url: https://papers.tinbergen.nl/10117.pdf File-Format: application/pdf File-Size: 151858 bytes Handle: RePEc:tin:wpaper:20100117