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Risk Aversion in the Large and in the Small

Author

Listed:
  • Jorgen HAUG

    (Norwegian School of Economics)

  • Thorsten HENS

    (University of Zurich and Swiss Finance Institute)

  • Peter WOHRMANN

    (University of Zurich and Stanford University)

Abstract

Estimates of agents' risk aversion di er between market studies and experimental studies. We demonstrate that the estimates can be reconciled through consistent treatment of agents' tendency for narrow framing, regarding integration of background wealth as well as across risky outcomes: Risk aversion is similar whenever similar degrees of narrow framing is assumed in either setting.

Suggested Citation

  • Jorgen HAUG & Thorsten HENS & Peter WOHRMANN, 2011. "Risk Aversion in the Large and in the Small," Swiss Finance Institute Research Paper Series 11-24, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp1124
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    More about this item

    Keywords

    Risk aversion; narrow framing; background wealth; laboratory experiments; market studies; equity premium puzzle.;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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