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How vulnerable is risk aversion to wealth, health and other risks? An empirical analysis for Europe

Author

Listed:
  • Christophe Courbage

    () (Geneva School of Business Administration (HES-SO), Switzerland)

  • Guillem Montoliu-Montes

    (University of Lausanne, Department of Actuarial Science, Switzerland)

  • Béatrice Rey

    (Univ Lyon, Université Lumière Lyon 2, GATE UMR 5824, F-69130 Ecully, France)

Abstract

This paper empirically assesses how financial risk aversion reacts to a change in individuals’ wealth and health and to the presence of both financial and health risks using the Survey of Health, Ageing, and Retirement in Europe (SHARE). Individuals in our sample exhibit financial risk aversion decreasing both in wealth and health. Financial risk aversion is also found to increase in the presence of a background financial risk and a background health risk. Interestingly, risk aversion is shown to be convex in wealth but linear in health. Such findings complement the literature on risk aversion behaviours and can help to better understand various economic decisions in a risky environment.

Suggested Citation

  • Christophe Courbage & Guillem Montoliu-Montes & Béatrice Rey, 2018. "How vulnerable is risk aversion to wealth, health and other risks? An empirical analysis for Europe," Working Papers 1827, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
  • Handle: RePEc:gat:wpaper:1827
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    References listed on IDEAS

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    More about this item

    Keywords

    risk aversion; (cross-) DARA; (cross-) risk vulnerability; background risk; health risk;
    All these keywords.

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior

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