Download This PaperRisk Aversion in the Large and in the Small
21 Pages Posted: 6 Jul 2011
Date Written: June 23, 2011
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.
Keywords: Risk aversion, narrow framing, background wealth, laboratory experiments, market studies, equity premium puzzle
JEL Classification: G11, G12, D81
Suggested Citation: Suggested Citation
Norwegian School of Economics and Business Administration (NHH)
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Swiss Finance Institute
c/o University of Geneva
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Switzerland