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Risk Aversion in the Large and in the Small

Author

Listed:
  • Haug, Jørgen

    (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration)

  • Hens, Thorsten

    (Dept. of Banking and Finance, University of Zurich)

  • Wöhrmann, Peter

    (Dept. of Management Science and Engineering, Stanford University)

Abstract

Estimates of agents' risk aversion differ between market studies and experimental studies. We demonstrate that the estimates can be reconciled through consistent treatment of agents' tendency for narrow framing, regarding integration of background wealth as well as across risky outcomes: Risk aversion is similar whenever similar degrees of narrow framing is assumed in either setting.

Suggested Citation

  • Haug, Jørgen & Hens, Thorsten & Wöhrmann, Peter, 2011. "Risk Aversion in the Large and in the Small," Discussion Papers 2011/12, Norwegian School of Economics, Department of Business and Management Science.
    • Handle: RePEc:hhs:nhhfms:2011_012
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    File URL: http://hdl.handle.net/11250/164172
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    References listed on IDEAS

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    More about this item

    Keywords

    Risk aversion; narrow framing; background wealth; laboratory experiments; market studies; equity premium puzzle;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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