Although investors are concerned foremost with mean and variance, they are also sensitive to downside risk. In this paper, we introduce an index of downside risk aversion to distinguish risk aversion from higher-order aspects of risk preference, including prudence. We show that the index of...

Predictions concerning structure and performance for managerial contracts designed to prevent accidents are developed and tested. The model predicts a step-function penalty with more costly, more reliable audits used for higher loss reports to control ex post exaggeration of the loss. In...