Subjective Measures of Risk Aversion and Portfolio Choice
AbstractThe paper investigates risk attitudes among different types of individuals. The authors use several different measures of risk attitudes, including questions on choices between uncertain income streams suggested by Barsky et al. (1997) and a number of ad hoc measures. As in Barsky et al. (1997) and Arrondel (2002), the authors first analyse individual variation in the risk aversion measures and explain them by background characteristics (both "objective" characteristics and other subjective measures of risk preference). Next, the authors incorporate the measured risk attitudes into a household partfolio allocation model, which explains portfolio shares, while accounting for incomplete portfolios. The authors results show that the Barsky et al. (1997) measure has little explanatory power, whereas ad hoc measures do a considerably better job. The authors provide a discussion of the reasons for this finding.
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Bibliographic InfoPaper provided by RAND Corporation Publications Department in its series Working Papers with number 02-03.
Length: 40 pages
Date of creation: Feb 2002
Date of revision:
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More information through EDIRC
risk aversion; portfolio choice; subjective measures; econometric models;
Other versions of this item:
- Kapteyn, A. & Teppa, F., 2002. "Subjective Measures of Risk Aversion and Portfolio Choice," Discussion Paper 2002-11, Tilburg University, Center for Economic Research.
- C5 - Mathematical and Quantitative Methods - - Econometric Modeling
- C9 - Mathematical and Quantitative Methods - - Design of Experiments
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
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- repec:fth:calaec:16-92 is not listed on IDEAS
- Christian Gollier, 2004. "The Economics of Risk and Time," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262572249, June.
- Robert B. Barsky & Miles S. Kimball & F. Thomas Juster & Matthew D. Shapiro, 1997. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Survey," NBER Working Papers 5213, National Bureau of Economic Research, Inc.
- French, Kenneth R. & Poterba, James M., 1990. "Japanese and U.S. cross-border common stock investments," Journal of the Japanese and International Economies, Elsevier, vol. 4(4), pages 476-493, December.
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