A1411
Title: Nonlinear dynamics in the risk aversion coefficient of strategic investors
Authors: Jose Olmo - Universidad de Zaragoza (Spain) [presenting]
Abstract: The aim is to study the portfolio decisions and risk aversion attitudes of individuals characterized by three distinguishing features. First, their optimal decisions involve a multiperiod utility function. Second, the risk aversion coefficient is dynamic and driven by a set of state variables reflecting economic conditions. Third, the model accommodates nonlinearities interpreted as differences in risk aversion to the long and short term. These nonlinearities are tested using a $p-$value transformation method. The application to a tactical portfolio reveals asymmetries in the impact of negative events on long term and short term risk aversion highlighting the differences between myopic and strategic investors.
