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Are risk-averse agents more optimistic? A Bayesian estimation approach

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  • Selima Ben Mansour

    (DRM, UMR-CNRS 7088, Université Paris-Dauphine, France)

  • Elyès Jouini

    (CEREMADE, UMR-CNRS 7534, Université Paris-Dauphine, France)

  • Jean-Michel Marin

    (INRIA Saclay, Projet SELECT , Laboratoire de Mathématiques, Université Paris-Sud, France)

  • Clotilde Napp

    (DRM, UMR-CNRS 7088, Université Paris-Dauphine, France)

  • Christian Robert

    (CEREMADE, UMR-CNRS 7534, Université Paris-Dauphine, France)

Abstract

Our aim is to analyze the link between optimism and risk aversion in a subjective expected utility setting and to estimate the average level of optimism when weighted by risk tolerance. Its estimation leads to a non-trivial statistical problem. We start from a large lottery survey (1536 individuals). We assume that individuals have true unobservable characteristics. We adopt a Bayesian approach and use a hybrid MCMC approximation method to numerically estimate the distributions of the unobservable characteristics. We find that individuals are on average pessimistic and that pessimism and risk tolerance are positively correlated. Copyright © 2008 John Wiley & Sons, Ltd.

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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.

Volume (Year): 23 (2008)
Issue (Month): 6 ()
Pages: 843-860

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Handle: RePEc:jae:japmet:v:23:y:2008:i:6:p:843-860

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Cited by:
  1. Giuseppe Albanese & Guido de Blasio & Paolo Sestito, 2013. "Trust and preferences: evidence from survey data," Temi di discussione (Economic working papers) 911, Bank of Italy, Economic Research and International Relations Area.
  2. Alessandro Bucciol & Raffaele Miniaci, 2011. "Household Portfolios and Implicit Risk Preference," The Review of Economics and Statistics, MIT Press, vol. 93(4), pages 1235-1250, November.
  3. Menapace, Luisa & Colson, Gregory, 2012. "On the Validity of Gamble Tasks to Assess Farmers' Risk Attitudes," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124601, Agricultural and Applied Economics Association.
  4. Elyès Jouini & Clotilde Napp, 2008. "Are More Risk-Averse Agents More Optimistic? Insights from a Simple Rational Expectations Equilibrium Model," Post-Print halshs-00176630, HAL.

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