Are Risk-Averse Agents more Optimistic? A Bayesian Estimation Approach
Our aim is to analyze the link between optimism and risk aversion in a subjective expected utility setting and to estimate the average level of optimism when weighted by risk tolerance. Its estimation leads to a non-trivial statistical problem. We start from a large lottery survey (1536 individuals). We assume that individuals have true unobservable characteristics. We adopt a Bayesian approach and use a hybrid MCMC approximation method to numerically estimate the distributions of the unobservable characteristics. We find that individuals are on average pessimistic and that pessimism and risk tolerance are positively correlated.
|Date of creation:||Sep 2008|
|Date of revision:|
|Publication status:||Published in Journal of Applied Econometrics, 2008, Vol. 23, no. 6. pp. 843-860.Length: 17 pages|
|Contact details of provider:|| Web page: http://www.dauphine.fr/en/welcome.html|
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