Characterizing Higher‐Order Ross More Risk Aversion by Comparison of Risk Compensation

Key Points

• The aim is to characterize higher-order Ross more risk aversion through risk compensation, expanding on existing frameworks.
• Extends the willingness-to-accept framework to a broader range of risk changes.
• Provides a characterization of precautionary saving strength based on precautionary compensation.
• Complementary analysis to prior work on precautionary premium.
• Establishes a new way of understanding risk aversion beyond traditional risk premiums.
• Demonstrates that precautionary saving is influenced by precautionary compensation.
• Contributes to the literature on economic behavior under uncertainty.