Aspects of Investor Behaviour Under Risk

A greatly enhanced understanding of the nature of economic uncertainty, and with it substantial insight into economic behaviour in circumstances under which uncertainty is central to necessary decisions, stand as one of Kenneth Arrow’s most significant contributions. His classic lectures on Aspects of the Theory of Risk-Bearing clarified key elements of the theory of choice under uncertainty, formalized crucial aspects of risk-averse behaviour, and explored the implications of the relevant theory for such important economic activities as resource allocation and insurance. These lectures, together with many of Arrow’s other papers on risk and uncertainty, have provided a foundation that is now standard in monetary and financial economics.