Abstract

http://ssrn.com/abstract=1507902
 
 

References (38)



 
 

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Risk Aversion and Wealth: Evidence from Person-to-Person Lending Portfolios


Daniel Paravisini


London School of Economics & Political Science (LSE); Columbia Business School - Finance and Economics

Veronica Rappoport


London School of Economics & Political Science (LSE)

Enrichetta Ravina


Columbia Business School - Finance and Economics

January 14, 2013


Abstract:     
We estimate risk aversion from investors’ portfolio choices on a person-to-person lending plat- form. Our method obtains a risk aversion parameter from each investment and generates a panel that we use to disentangle the elasticity of risk aversion to wealth from heterogeneity in risk attitudes across investors and changes in beliefs. We find an average income-based Relative Risk Aversion of 2.85, a median of 1.62, and substantial heterogeneity and skewness across investors. Risk aversion increases after a negative housing wealth shock, consistent with Decreasing Relative Risk Aversion. We show that ignoring heterogeneity and changes in beliefs would lead to biased estimates.

Number of Pages in PDF File: 61

Keywords: Risk Aversion, Panel Data, Credit Market

JEL Classification: E21, G11, D12, D14

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Date posted: November 20, 2009 ; Last revised: February 9, 2013

Suggested Citation

Paravisini, Daniel and Rappoport, Veronica and Ravina, Enrichetta, Risk Aversion and Wealth: Evidence from Person-to-Person Lending Portfolios (January 14, 2013). Available at SSRN: http://ssrn.com/abstract=1507902 or http://dx.doi.org/10.2139/ssrn.1507902

Contact Information

Daniel Paravisini
London School of Economics & Political Science (LSE) ( email )
Houghton Street
London, WC2A 2AE
United Kingdom
Columbia Business School - Finance and Economics ( email )
3022 Broadway
New York, NY 10027
United States

Veronica Rappoport
London School of Economics & Political Science (LSE) ( email )
Houghton Street
London, WC2A 2AE
United Kingdom
Enrichetta Ravina (Contact Author)
Columbia Business School - Finance and Economics ( email )
3022 Broadway
New York, NY 10027
United States
HOME PAGE: http://www0.gsb.columbia.edu/faculty/eravina/research.html

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References:  38
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