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Survey measures of risk aversion and prudence

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  • Joseph Eisenhauer
  • Luigi Ventura

Abstract

This paper utilizes a thought experiment conducted by the Bank of Italy to estimate absolute and relative risk aversion along with absolute and relative prudence for a broad cross-section of Italian households. Upper and lower bounds are calculated for each parameter, and comparisons are made across socio-demographic groups. Evidence is found of decreasing absolute risk aversion, decreasing absolute prudence, increasing relative risk aversion, and increasing relative prudence.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 35 (2003)
Issue (Month): 13 ()
Pages: 1477-1484

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Handle: RePEc:taf:applec:v:35:y:2003:i:13:p:1477-1484

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References

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  7. Guiso, Luigi & Paiella, Monica, 2001. "Risk Aversion, Wealth and Background Risk," CEPR Discussion Papers 2728, C.E.P.R. Discussion Papers.
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  9. Kimball, Miles S, 1990. "Precautionary Saving in the Small and in the Large," Econometrica, Econometric Society, vol. 58(1), pages 53-73, January.
  10. Mankiw, N.G. & Zeldes, S.P., 1990. "The Consumption Of Stockholders And Non-Stockholders," Weiss Center Working Papers 23-90, Wharton School - Weiss Center for International Financial Research.
  11. Kuehlwein, Michael, 1991. "A test for the presence of precautionary saving," Economics Letters, Elsevier, vol. 37(4), pages 471-475, December.
  12. Philip Merrigan & Michel Normandin, 1994. "Precautionary Saving Motives: An Assessment from U.K. Time Series of Cross-Sections," Cahiers de recherche CREFE / CREFE Working Papers 29, CREFE, Université du Québec à Montréal.
  13. Joseph G. Eisenhauer, 2000. "Estimating Prudence," Eastern Economic Journal, Eastern Economic Association, vol. 26(4), pages 379-392, Fall.
  14. Robert B. Barsky & Miles S. Kimball & F. Thomas Juster & Matthew D. Shapiro, 1995. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Survey," NBER Working Papers 5213, National Bureau of Economic Research, Inc.
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  17. Jonathan A. Parker, 1999. "The Reaction of Household Consumption to Predictable Changes in Social Security Taxes," American Economic Review, American Economic Association, vol. 89(4), pages 959-973, September.
  18. Jonathan S. Skinner, 1987. "Risky Income, Life Cycle Consumption, and Precautionary Savings," NBER Working Papers 2336, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Elyès Jouini & Selima Ben Mansour & Clotilde Napp & Jean-Michel Marin & Christian Robert, 2008. "Are Risk Averse Agents More Optimistic? A Bayesian Estimation Approach," Post-Print halshs-00176629, HAL.
  2. Levaggi, Rosella & Menoncin, Francesco, 2013. "Optimal dynamic tax evasion," Journal of Economic Dynamics and Control, Elsevier, vol. 37(11), pages 2157-2167.
  3. Hartog, Joop & Vijverberg, Wim, 2007. "Schools, skills and risk," Economics of Education Review, Elsevier, vol. 26(6), pages 758-770, December.
  4. Eisenhauer, Joseph G., 2008. "Ethical preferences, risk aversion, and taxpayer behavior," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 37(1), pages 45-63, February.
  5. Kerstens, Kristiaan & Mounir, Amine & Van de Woestyne, Ignace, 2011. "Geometric representation of the mean-variance-skewness portfolio frontier based upon the shortage function," European Journal of Operational Research, Elsevier, vol. 210(1), pages 81-94, April.
  6. Natalia, Khorunzhina & Wayne Roy, Gayle, 2011. "Heterogenous intertemporal elasticity of substitution and relative risk aversion: estimation of optimal consumption choice with habit formation and measurement errors," MPRA Paper 34329, University Library of Munich, Germany.
  7. Noussair, C.N. & Trautmann, S.T. & Kuilen, G. van de, 2011. "Higher Order Risk Attitudes, Demographics, and Financial Decisions," Discussion Paper 2011-055, Tilburg University, Center for Economic Research.
  8. Luigi Ventura, 2003. "Direct Measures of Time Preference," The Economic and Social Review, Economic and Social Studies, vol. 34(3), pages 293–310.
  9. Sule Alan & Martin Browning, 2010. "Estimating Intertemporal Allocation Parameters using Synthetic Residual Estimation," Review of Economic Studies, Oxford University Press, vol. 77(4), pages 1231-1261.
  10. repec:ebl:ecbull:v:4:y:2003:i:38:p:1-10 is not listed on IDEAS
  11. Robert, Christian P. & Napp, Clotilde & Marin, Jean-Michel & Jouini, Elyès & Ben Mansour, Selima, 2008. "Are Risk-Averse Agents more Optimistic? A Bayesian Estimation Approach," Economics Papers from University Paris Dauphine 123456789/2324, Paris Dauphine University.
  12. Luigi Ventura & Joseph G. Eisenhauer, 2005. "The Relevance of Precautionary Saving," German Economic Review, Verein für Socialpolitik, vol. 6(1), pages 23-35, 02.
  13. Maurice J. Roche, 2006. "The equity premium puzzle and decreasing relative risk aversion," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 2(3), pages 179-182, May.
  14. repec:ebl:ecbull:v:4:y:2007:i:23:p:1-11 is not listed on IDEAS
  15. 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.
  16. Joseph G. Eisenhauer, 2006. "The Shadow Price of Morality," Eastern Economic Journal, Eastern Economic Association, vol. 32(3), pages 437-456, Summer.
  17. Klaus Nowotny, 2010. "Risk Aversion, Time Preference and Cross-border Commuting and Migration Intentions," WIFO Working Papers 379, WIFO.
  18. Paul MAKDISSI & Quentin WODON, 2004. "Price Liberalization and Farmer Welfare Under Risk Aversion: Cotton in Benin and Ivory Coast," Cahiers de recherche 04-09, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke.
  19. John Cotter & Jim Hanly, 2014. "Performance of Utility Based Hedges," Working Papers 201404, Geary Institute, University College Dublin.

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