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Measuring Risk Aversion

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  • Meyer, Donald J.
  • Meyer, Jack

Abstract

The purpose of the survey is to summarize, discuss, and interpret published research concerning the risk aversion of decision makers who maximize expected utility. In doing this, two points are emphasized. First, any measure of risk aversion is specific to the particular outcome variable over which the measure is defined or estimated, and second when outcome variables are related, then their risk aversion measures are also related. These two points are used to show that a substantial portion of the reported variation in magnitudes and slopes of risk aversion measures from the research of the past forty years results from differences in the outcome variables, and when these differences are adjusted for, those findings are a quite consistent body of evidence.

Suggested Citation

  • Meyer, Donald J. & Meyer, Jack, 2006. "Measuring Risk Aversion," Foundations and Trends(R) in Microeconomics, now publishers, vol. 2(2), pages 107-203, September.
    • Handle: RePEc:now:fntmic:0700000006
    DOI: 10.1561/0700000006
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    Cited by:

    1. Allanson, Paul, 2008. "On the characterisation and measurement of the welfare effects of income mobility from an ex-ante perspective," SIRE Discussion Papers 2008-48, Scottish Institute for Research in Economics (SIRE).
    2. Leif Danziger & Eliakim Katz, 2019. "Compensation in Personal Injury Cases: Mean or Median Income?," CESifo Working Paper Series 7748, CESifo.
    3. Just, David R., 2011. "Calibrating the wealth effects of decoupled payments: Does decreasing absolute risk aversion matter?," Journal of Econometrics, Elsevier, vol. 162(1), pages 25-34, May.
    4. Pope, Rulon D. & LaFrance, Jeffrey T. & Just, Richard E., 2011. "Agricultural arbitrage and risk preferences," Journal of Econometrics, Elsevier, vol. 162(1), pages 35-43, May.
    5. Lakdawalla, Darius N. & Phelps, Charles E., 2020. "Health technology assessment with risk aversion in health," Journal of Health Economics, Elsevier, vol. 72(C).
    6. Buchholz Wolfgang & Heindl Peter, 2015. "Ökonomische Herausforderungen des Klimawandels," Perspektiven der Wirtschaftspolitik, De Gruyter, vol. 16(4), pages 324-350, December.
    7. Alistair Ulph & Pedro Pintassilgo & Michael Finus, 2019. "Uncertainty, Learning and International Environmental Agreements: The Role of Risk Aversion," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 73(4), pages 1165-1196, August.
    8. Stamatios Tsigos & Kevin Daly, 2016. "“Fair go” for all? Wealth and Risk Aversion of Australian Households," Australian Economic Papers, Wiley Blackwell, vol. 55(3), pages 274-300, September.
    9. Joseph G. Eisenhauer, 2010. "Relative Risk Aversion as an Arc Elasticity," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 13(1), pages 161-172, March.
    10. Leif Danziger & Eliakim Katz, 2019. "Compensation in personal injury cases: mean or median income?," European Journal of Law and Economics, Springer, vol. 48(2), pages 291-303, October.
    11. Danziger, Leif & Katz, Eliakim, 2019. "Compensation in Personal Injury Cases: Mean or Median Income?," IZA Discussion Papers 12466, Institute of Labor Economics (IZA).
    12. Hillesland, Marya, 2019. "Gender differences in risk behavior: An analysis of asset allocation decisions in Ghana," World Development, Elsevier, vol. 117(C), pages 127-137.
    13. Paul Allanson, 2012. "On the characterization and economic evaluation of income mobility as a process of distributional change," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 10(4), pages 505-528, December.
    14. Bernard Sinclair-Desgagné & Sandrine Spaeter, 2016. "Incentive Contracts and Downside Risk Sharing," Working Papers of BETA 2016-22, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    15. Leif Danziger & Eliakim Katz, 2017. "Compensation for Loss of Work Income in Personal Injury Cases," CESifo Working Paper Series 6570, CESifo.
    16. Joseph G. Eisenhauer, 2017. "Quantifying the Subjective Value of Certainty," German Economic Review, Verein für Socialpolitik, vol. 18(1), pages 118-131, February.
    17. Zgajnar, Jaka & Kavcic, Stane, 2011. "Weighted Goal Programming and Penalty Functions: Whole-farm Planning Approach Under Risk," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 118033, European Association of Agricultural Economists.
    18. J. François Outreville, 2015. "The Relationship Between Relative Risk Aversion And The Level Of Education: A Survey And Implications For The Demand For Life Insurance," Journal of Economic Surveys, Wiley Blackwell, vol. 29(1), pages 97-111, February.
    19. Eisenhauer, Joseph G., 2010. "Rank-ordering of risk preferences with conventional and discrete measures," The Quarterly Review of Economics and Finance, Elsevier, vol. 50(3), pages 291-297, August.
    20. Scott Farrow, 2015. "A comparison of key benefit estimation issues for natural hazards and terrorism: ex ante/ex post valuation and endogenous risk," Chapters, in: Carol Mansfield & V. K. Smith (ed.), Benefit–Cost Analyses for Security Policies, chapter 6, pages 140-154, Edward Elgar Publishing.

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