The Experts below are selected from a list of 324 Experts worldwide ranked by ideXlab platform
Luigi Guiso - One of the best experts on this subject based on the ideXlab platform.
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time varying Risk Aversion
Journal of Financial Economics, 2018Co-Authors: Luigi Guiso, Paola Sapienza, Luigi ZingalesAbstract:We use a repeated survey of an Italian bank’s clients to test whether investors’ Risk Aversion increases following the 2008 financial crisis. We find that both a qualitative and a quantitative measure of Risk Aversion increases substantially after the crisis. After considering standard explanations, we investigate whether this increase might be an emotional response (fear) triggered by a scary experience. To show the plausibility of this conjecture, we conduct a lab experiment. We find that subjects who watched a horror movie have a certainty equivalent that is 27% lower than the ones who did not, supporting the fear-based explanation. Finally, we test the fear-based model with actual trading behavior and find consistent evidence.
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Risk Aversion wealth and background Risk
Journal of the European Economic Association, 2008Co-Authors: Luigi Guiso, Monica PaiellaAbstract:We use household survey data to construct a direct measure of absolute Risk Aversion based on the maximum price a consumer is willing to pay for a Risky security. We relate this measure to consumer's endowments and attributes and to measures of background Risk and liquidity constraints. We find that Risk Aversion is a decreasing function of the endowment-thus rejecting CARA preferences. We estimate the elasticity of Risk Aversion to consumption at about 0.7, below the unitary value predicted by CRRA utility. We also find that households' attributes are of little help in predicting their degree of Risk Aversion, which is characterized by massive unexplained heterogeneity. We show that the consumer's environment affects Risk Aversion. Individuals who are more likely to face income uncertainty or to become liquidity constrained exhibit a higher degree of absolute Risk Aversion, consistent with recent theories of attitudes toward Risk in the presence of uninsurable Risks. (JEL: D1, D8) (c) 2008 by the European Economic Association.
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Risk Aversion wealth and background Risk
2004 Meeting Papers, 2001Co-Authors: Luigi Guiso, Monica PaiellaAbstract:We use household survey data to construct a direct measure of absolute Risk Aversion based on the maximum price a consumer is willing to pay to buy a Risky security. We relate this measure to consumers' endowment and attributes and to measures of background Risk and liquidity constraints. We find that Risk Aversion is a decreasing function of endowment - thus rejecting CARA preferences - but the elasticity to consumption is far below the unitary value predicted by CRRA utility. We also find that households' attributes are of little help in predicting their degree of Risk Aversion, which is characterized by massive unexplained heterogeneity. However, the consumers' environment affects Risk Aversion. Individuals who are more likely to face income uncertainty or to become liquidity constrained exhibit a higher degree of absolute Risk Aversion, consistent with recent theories of attitudes towards Risk in the presence of uninsurable Risks.
Monica Paiella - One of the best experts on this subject based on the ideXlab platform.
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Risk Aversion wealth and background Risk
Journal of the European Economic Association, 2008Co-Authors: Luigi Guiso, Monica PaiellaAbstract:We use household survey data to construct a direct measure of absolute Risk Aversion based on the maximum price a consumer is willing to pay for a Risky security. We relate this measure to consumer's endowments and attributes and to measures of background Risk and liquidity constraints. We find that Risk Aversion is a decreasing function of the endowment-thus rejecting CARA preferences. We estimate the elasticity of Risk Aversion to consumption at about 0.7, below the unitary value predicted by CRRA utility. We also find that households' attributes are of little help in predicting their degree of Risk Aversion, which is characterized by massive unexplained heterogeneity. We show that the consumer's environment affects Risk Aversion. Individuals who are more likely to face income uncertainty or to become liquidity constrained exhibit a higher degree of absolute Risk Aversion, consistent with recent theories of attitudes toward Risk in the presence of uninsurable Risks. (JEL: D1, D8) (c) 2008 by the European Economic Association.
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Risk Aversion wealth and background Risk
2004 Meeting Papers, 2001Co-Authors: Luigi Guiso, Monica PaiellaAbstract:We use household survey data to construct a direct measure of absolute Risk Aversion based on the maximum price a consumer is willing to pay to buy a Risky security. We relate this measure to consumers' endowment and attributes and to measures of background Risk and liquidity constraints. We find that Risk Aversion is a decreasing function of endowment - thus rejecting CARA preferences - but the elasticity to consumption is far below the unitary value predicted by CRRA utility. We also find that households' attributes are of little help in predicting their degree of Risk Aversion, which is characterized by massive unexplained heterogeneity. However, the consumers' environment affects Risk Aversion. Individuals who are more likely to face income uncertainty or to become liquidity constrained exhibit a higher degree of absolute Risk Aversion, consistent with recent theories of attitudes towards Risk in the presence of uninsurable Risks.
Carole Treibich - One of the best experts on this subject based on the ideXlab platform.
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Is Self-Reported Risk Aversion Time Variant?
Revue d'économie politique, 2020Co-Authors: Seeun Jung, Carole TreibichAbstract:ACL-3International audienceWe examine a Japanese Panel Survey in order to check whether self-reported Risk Aversion varies over time. In most panels, Risk attitude variables are collected only once (found in only one survey wave), and it is assumed that self-reported Risk Aversion reflects the individual’s time-invariant component of preferences toward Risk. Nonetheless, the question could be asked as to whether the financial and personal shocks an individual faces over his lifetime modify his Risk Aversion. Our empirical analysis provides evidence that Risk Aversion is composed of a time-variant part and shows that the variation cannot be ascribed to measurement error or noise given that it is related to income shocks. Yet, the true time variant factor explains a relatively small share of the observed variation in Risk Aversion while differences between individuals account for nearly 50 % of it. Taking into account the fact that there are time-variant factors in Risk Aversion, we investigate how often it is preferable to collect the Risk Aversion measure in long panel surveys. Our result suggests that the best predictor of current behavior is the average of Risk Aversion, where Risk Aversion is collected every two years. It is therefore advisable for Risk Aversion measures to be collected every two years in long panel surveys
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Is Self-Reported Risk Aversion Time Variant?
Revue D Economie Politique, 2015Co-Authors: Seeun Jung, Carole TreibichAbstract:We examine a Japanese Panel Survey in order to check whether self-reported Risk Aversion varies over time. In most panels, Risk attitude variables are collected only once (found in only one survey wave), and it is assumed that self-reported Risk Aversion reflects the individual’s time-invariant component of preferences toward Risk. Nonetheless, the question could be asked as to whether the financial and personal shocks an individual faces over his lifetime modify his Risk Aversion. Our empirical analysis provides evidence that Risk Aversion is composed of a time-variant part and shows that the variation cannot be ascribed to measurement error or noise given that it is related to income shocks. Yet, the true time variant factor explains a relatively small share of the observed variation in Risk Aversion while differences between individuals account for nearly 50 % of it. Taking into account the fact that there are time-variant factors in Risk Aversion, we investigate how often it is preferable to collect the Risk Aversion measure in long panel surveys. Our result suggests that the best predictor of current behavior is the average of Risk Aversion, where Risk Aversion is collected every two years. It is therefore advisable for Risk Aversion measures to be collected every two years in long panel surveys.
Richard Watt - One of the best experts on this subject based on the ideXlab platform.
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The Effect of Prices on Risk Aversion
Theoretical Economics Letters, 2020Co-Authors: Richard Watt, Francisco J. VázquezAbstract:Traditionally, Risk Aversion (both absolute and relative) has been expressed as a function of wealth alone. The charac- teristics of Risk Aversion as wealth changes have been extensively studied. However, prices, as well as wealth, enter the indirect utility function, from which the typical Risk Aversion measures are calculated. Given that, changes in prices will affect Risk Aversion, although exactly how has not been considered in the literature. This paper provides such an analysis. In particular, we firstly remind the reader that both absolute and relative Risk Aversion are homogeneous functions, and as such independently of their particular slopes in wealth, there is a natural effect that holds relative Risk Aversion constant and decreases absolute Risk Aversion when prices and wealth are increased by a common factor. We also show that the size of relative Risk Aversion as compared to the number 1, which is of much importance to the comparative statics of the economics of Risk and uncertainty, depends on how changes in prices affect marginal utility. Under plausible (and standard) theoretical assumptions we find that relative Risk Aversion is likely to be increasing, and that increases in prices will have a tempering effect on Risk Aversion
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Allocative downside Risk Aversion
International Journal of Economic Theory, 2013Co-Authors: Richard Watt, Francisco J. VázquezAbstract:Traditionally, downside Risk Aversion is the study of the placement of a pure Risk (a secondary Risk) on either the upside or the downside of a primary two-state Risk. When the decision maker prefers to have the secondary Risk placed on the upside rather than the downside of the primary lottery, he is said to display downside Risk Aversion. The literature on the intensity of downside Risk Aversion has been clear on the point that greater prudence is not equivalent to greater downside Risk Aversion, although the two concepts are linked. In the present paper we present a new, and we argue equally natural, concept of the downside Risk Aversion of a decision maker, namely the fraction of a zero mean Risk that the decision maker would optimally place on the upside. We then consider how this measure can be used to identify the intensity of downside Risk Aversion. Specifically, we show that greater downside Risk Aversion in our model can be accurately measured by a relationship that is very similar to, although somewhat stronger than, greater prudence.
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A Note on Greater Downside Risk Aversion
SSRN Electronic Journal, 2011Co-Authors: Richard WattAbstract:This paper characterizes downside Risk Aversion in a simple and intuitive manner. It is shown that using this characterization one can simplify considerably a theorem by Jindapon (2010) relating to greater downside Risk Aversion as measured by the prudence probability premium. The comparative statics of downside Risk Aversion in Risk-free wealth are also considered.
Seeun Jung - One of the best experts on this subject based on the ideXlab platform.
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Is Self-Reported Risk Aversion Time Variant?
Revue d'économie politique, 2020Co-Authors: Seeun Jung, Carole TreibichAbstract:ACL-3International audienceWe examine a Japanese Panel Survey in order to check whether self-reported Risk Aversion varies over time. In most panels, Risk attitude variables are collected only once (found in only one survey wave), and it is assumed that self-reported Risk Aversion reflects the individual’s time-invariant component of preferences toward Risk. Nonetheless, the question could be asked as to whether the financial and personal shocks an individual faces over his lifetime modify his Risk Aversion. Our empirical analysis provides evidence that Risk Aversion is composed of a time-variant part and shows that the variation cannot be ascribed to measurement error or noise given that it is related to income shocks. Yet, the true time variant factor explains a relatively small share of the observed variation in Risk Aversion while differences between individuals account for nearly 50 % of it. Taking into account the fact that there are time-variant factors in Risk Aversion, we investigate how often it is preferable to collect the Risk Aversion measure in long panel surveys. Our result suggests that the best predictor of current behavior is the average of Risk Aversion, where Risk Aversion is collected every two years. It is therefore advisable for Risk Aversion measures to be collected every two years in long panel surveys
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Is Self-Reported Risk Aversion Time Variant?
Revue D Economie Politique, 2015Co-Authors: Seeun Jung, Carole TreibichAbstract:We examine a Japanese Panel Survey in order to check whether self-reported Risk Aversion varies over time. In most panels, Risk attitude variables are collected only once (found in only one survey wave), and it is assumed that self-reported Risk Aversion reflects the individual’s time-invariant component of preferences toward Risk. Nonetheless, the question could be asked as to whether the financial and personal shocks an individual faces over his lifetime modify his Risk Aversion. Our empirical analysis provides evidence that Risk Aversion is composed of a time-variant part and shows that the variation cannot be ascribed to measurement error or noise given that it is related to income shocks. Yet, the true time variant factor explains a relatively small share of the observed variation in Risk Aversion while differences between individuals account for nearly 50 % of it. Taking into account the fact that there are time-variant factors in Risk Aversion, we investigate how often it is preferable to collect the Risk Aversion measure in long panel surveys. Our result suggests that the best predictor of current behavior is the average of Risk Aversion, where Risk Aversion is collected every two years. It is therefore advisable for Risk Aversion measures to be collected every two years in long panel surveys.
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Shirking, Monitoring, and Risk Aversion
2014Co-Authors: Seeun Jung, Kenneth HoungbedjiAbstract:This paper studies the effect of Risk Aversion on effort under different monitoring schemes. It uses a theoretical model which relaxes the assumption of agents being Risk neutral, and investigates changes of effort as monitoring varies. The predictions of the theoretical model are tested using an original experimental setting where the level of Risk Aversion is measured and monitoring rates vary exogenously. Our results show that shirking decreases with Risk Aversion, being female, and monitoring. Moreover, monitoring is more effective to curtail shirking behaviors for subjects who are less Risk averse, although the size of the impact is rather small.
