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Bounding risk aversion

Author

Listed:
  • Thomas Demuynck
  • Per Hjertstrand

Abstract

We propose a revealed preference method to non-parametrically bound the coefficients of relative (and absolute) risk aversion in an expected utility framework.Our approach abstains from placing functional form restrictions on the Bernoulliutility function. Our method is applicable to any finite number of observations onchoices over Arrow-Debreu contingent claims, and can be efficiently implementedusing linear or quadratic programming techniques. We illustrate our results usinga large-scaled experimental data set

Suggested Citation

  • Thomas Demuynck & Per Hjertstrand, 2026. "Bounding risk aversion," Working Papers ECARES 2026-12, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:eca:wpaper:2013/405675
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    References listed on IDEAS

    as
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    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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