The Role of Risk Aversion in Predicting Individual Behaviour

Preprint OPEN
Monica Paiella; Luigi Guiso;
  • Subject: Risk aversion, heterogeneous preferences, choice under risk, entrepreneurship, self selection
    • jel: jel:D1 | jel:D8
    mesheuropmc: health care economics and organizations

We use household survey data to construct a direct measure of absolute risk aversion based on the maximum price a consumer is willing to pay to buy a risky asset. We relate this measure to a set of consumers' decisions that in theory should vary with attitude towards ri... View more
  • References (31)
    31 references, page 1 of 4

    [1] Amemyia, Takeshi (1982), Two Stages Least Absolute Deviations Estimators, Econometrica, 50, 689-711.

    [2] Arrow, Kenneth J. (1970), Essays in the Theory of Risk Bearing, Amsterdam: North Holland.

    [3] Barsky, Robert B., Thomas F. Juster, Miles S. Kimball and Matthew D. Shapiro (1997), “Preference Parameters and Behavioral Heterogeneity: an Experimental Approach in the health and Retirement Study”, Quarterly Journal of Economics, CXII, 537-580.

    [4] Block, M. K., and J. M. Heineke (1973), ”The allocation of e¤ort under uncertainty: the case of risk averse behavior”, Journal of Political Economy 81, 376-85.

    [5] Breeden, Douglas T. (1979), “An Intertemporal Asset Pricing Model with Stochastic Consumption and Investment Opportunities”, Journal of Financial Economics, 7, 265-96.

    [6] Brandolini, Andrea and Luigi Cannari (1994), “Methodological Appendix”, in: Albert Ando, Luigi Guiso and Ignazio Visco (eds.) “Saving and the Accumulation of Wealth”, Cambridge: Cambridge University Press.

    [7] Brunello, Giorgio (2002), ”Absolute Risk Aversion and the Returns to Education”, Economics of Education Review, 21, 635-640.

    [8] Caballero, Ricardo (1991), ”Earnings uncertainty and aggregate wealth accumulation”, American Economic Review, 81: 859-871.

    [9] Cagetti, Marco and Cristina De Nardi (2002), ”Entrepreneurship, Frictions and Wealth”, Federal Reserve Bank of Minneapolis Working Paper no. 620, March.

    [10] Carroll, Christopher D. (2001), “Portfolios of the Rich”, in Luigi Guiso, Michael Haliassos and Tullio Jappelli (eds.) “Household Portfolios”, Boston: MIT Press.

  • Metrics
Share - Bookmark