Term Structure of Psychological Interest Rates: A Behavioral Test

44 Pages Posted: 21 Sep 2009

Date Written: September 20, 2009

Abstract

The subjective value given to time is a core concept of microeconomic choices. Using a sample of individuals questioned with regard to their time preference attitudes, we show that the subjective interest rate follows a negatively sloped term structure. It can be parameterized using two variables, one specifying the instantaneous time preference, the other characterizing the slope of the term structure. A trade-off law is identified between these two parameters. We also show that the term structure of psychological rates depends strongly on gender. We also question the cross relationship between risk aversion and time preference.

Keywords: subjective interest rate, time preference, behavioral economics, psychological time value, risk aversion

JEL Classification: C9, D03, D91

Suggested Citation

de La Bruslerie, Hubert, Term Structure of Psychological Interest Rates: A Behavioral Test (September 20, 2009). Available at SSRN: https://ssrn.com/abstract=1475944 or http://dx.doi.org/10.2139/ssrn.1475944

Hubert De La Bruslerie (Contact Author)

Université Paris Dauphine ( email )

DRM Finance
Paris, 75116
France
(33) 1 44 05 44 05 (Phone)

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
75
Abstract Views
672
Rank
572,227
PlumX Metrics