Subjective Measures of Risk Aversion and Portfolio Choice
The 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.
|Date of creation:||Feb 2002|
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- Robert B. Barsky & Miles S. Kimball & F. Thomas Juster & Matthew D. Shapiro, 1995. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Survey," NBER Working Papers 5213, National Bureau of Economic Research, Inc.
- Richard H. Thaler & Shlomo Benartzi, 2001. "Naive Diversification Strategies in Defined Contribution Saving Plans," American Economic Review, American Economic Association, vol. 91(1), pages 79-98, March.
- Michael Haliassos & Christis Hassapis, 2002. "Equity culture and household behavior," Oxford Economic Papers, Oxford University Press, vol. 54(4), pages 719-745, October.
- Robert B. Barsky & F. Thomas Juster & Miles S. Kimball & Matthew D. Shapiro, 1997. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Study," The Quarterly Journal of Economics, Oxford University Press, vol. 112(2), pages 537-579.
- Jermann, Urban J., 2002.
"International portfolio diversification and endogenous labor supply choice,"
European Economic Review,
Elsevier, vol. 46(3), pages 507-522, March.
- Jermann, U.J., 1998. "International Portfolio Diversification and Endogenous Labour Supply Choice," Weiss Center Working Papers 98-06, Wharton School - Weiss Center for International Financial Research.
- French, Kenneth R & Poterba, James M, 1991. "Investor Diversification and International Equity Markets," American Economic Review, American Economic Association, vol. 81(2), pages 222-226, May.
- Kenneth R. French & James M. Poterba, 1991. "Investor Diversification and International Equity Markets," NBER Working Papers 3609, National Bureau of Economic Research, Inc.
- Linda L. Tesar & Ingrid M. Werner, 1994. "International Equity Transactions and U.S. Portfolio Choice," NBER Chapters,in: The Internationalization of Equity Markets, pages 185-227 National Bureau of Economic Research, Inc.
- Linda L. Tesar & Ingrid M. Werner, 1994. "International Equity Transactions and U.S. Portfolio Choice," NBER Working Papers 4611, 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.
- Cooper, Ian & Kaplanis, Evi, 1994. "Home Bias in Equity Portfolios, Inflation Hedging, and International Capital Market Equilibrium," Review of Financial Studies, Society for Financial Studies, vol. 7(1), pages 45-60. Full references (including those not matched with items on IDEAS)
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