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Exploring Higher Order Risk Effects
The Review of Economic Studies
Higher-order risk effects play an important role in examining economic behavior under uncertainty. A precautionary demand for saving has been linked to the property of prudence and the property of temperance has been used to show how the presence of an unavoidable risk affects one's behavior towards a second risk. These two properties also play key roles in aversion to negative skewness and to kurtosis, respectively. Both properties recently have been characterized by preferences over lotterydoi:10.1111/j.1467-937x.2010.00605.x fatcat:js6anilbqbfvhnf4cya5caoipa