Are Risk Attitudes Fixed Factors or Fleeting Feelings?
AbstractWe investigate the stability of measured risk attitudes over time, using a 13-year longitudinal sample of individuals in the NLSY79. We find that an individualâ€™s risk aversion changes systematically in response to personal economic circumstances. �Risk aversion increases with lengthening spells of employment and time out of labor force, and decreases with lengthening unemployment spells.� However, the most important result is that the majority of the variation in risk aversion is due to changes in measured individual tastes over time and not to variation across individuals.� These findings that measured risk preferences are endogenous and subject to substantial measurement errors suggest caution in interpreting coefficients in models relying on contemporaneous, one-time measures of risk preferences. �
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 35751.
Date of creation: 10 Jan 2013
Date of revision:
Contact details of provider:
Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
Web page: http://www.econ.iastate.edu
More information through EDIRC
risk aversion; stability; variance decomposition; within; measurement error; between; fixed effects;
Find related papers by JEL classification:
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-01-19 (All new papers)
- NEP-EXP-2013-01-19 (Experimental Economics)
- NEP-LAB-2013-01-19 (Labour Economics)
- NEP-RMG-2013-01-19 (Risk Management)
- NEP-UPT-2013-01-19 (Utility Models & Prospect Theory)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ulrike Malmendier & Stefan Nagel, 2009.
"Depression Babies: Do Macroeconomic Experiences Affect Risk-Taking?,"
NBER Working Papers
14813, National Bureau of Economic Research, Inc.
- Ulrike Malmendier & Stefan Nagel, 2011. "Depression Babies: Do Macroeconomic Experiences Affect Risk Taking?," The Quarterly Journal of Economics, Oxford University Press, vol. 126(1), pages 373-416.
- Isaac, R Mark & James, Duncan, 2000. " Just Who Are You Calling Risk Averse?," Journal of Risk and Uncertainty, Springer, vol. 20(2), pages 177-87, March.
- Donkers, A.C.D. & Melenberg, B. & Soest, A.H.O. van, 1999.
"Estimating Risk Attitudes Using Lotteries; A Large Sample Approach,"
1999-12, Tilburg University, Center for Economic Research.
- Donkers, Bas & Melenberg, Bertrand & Van Soest, Arthur, 2001. " Estimating Risk Attitudes Using Lotteries: A Large Sample Approach," Journal of Risk and Uncertainty, Springer, vol. 22(2), pages 165-95, March.
- Lisa Anderson & Jennifer Mellor, 2009.
"Are risk preferences stable? Comparing an experimental measure with a validated survey-based measure,"
Journal of Risk and Uncertainty,
Springer, vol. 39(2), pages 137-160, October.
- Lisa R. Anderson & Jennifer M. Mellor, 2008. "Are Risk Preferences Stable? Comparing an Experimental Measure with a Validated Survey-Based Measure," Working Papers 74, Department of Economics, College of William and Mary.
- Hartog, Joop & Ferrer-i-Carbonell, Ada & Jonker, Nicole, 2002. "Linking Measured Risk Aversion to Individual Characteristics," Kyklos, Wiley Blackwell, vol. 55(1), pages 3-26.
- Love, Ross O. & Robison, Lindon J., 1984. "An Empirical Analysis Of The Intertemporal Stability Of Risk Preference," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 16(01), July.
- Daniel J. Benjamin & Sebastian A. Brown & Jesse M. Shapiro, 2006. "Who is “Behavioral”? Cognitive Ability and Anomalous Preferences," Levine's Working Paper Archive 122247000000001334, David K. Levine.
- Hans Binswanger, 1980. "Attitudes toward risk: Experimental measurement in rural india," Artefactual Field Experiments 00009, The Field Experiments Website.
- Feinberg, Robert M, 1977. "Risk Aversion, Risk, and the Duration of Unemployment," The Review of Economics and Statistics, MIT Press, vol. 59(3), pages 264-71, August.
- Marc F. Bellemare & Zachary S. Brown, 2010. "On the (Mis)Use of Wealth as a Proxy for Risk Aversion," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(1), pages 273-282.
- Levon Barseghyan & Jeffrey Prince & Joshua C. Teitelbaum, 2011. "Are Risk Preferences Stable across Contexts? Evidence from Insurance Data," American Economic Review, American Economic Association, vol. 101(2), pages 591-631, April.
- Barsky, Robert B, et al, 1997. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Study," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 537-79, May.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Stephanie Bridges) The email address of this maintainer does not seem to be valid anymore. Please ask Stephanie Bridges to update the entry or send us the correct address.
If references are entirely missing, you can add them using this form.