Risk Aversion in the Large and in the Small

21 Pages Posted: 6 Jul 2011

See all articles by Jørgen Haug

Jørgen Haug

Norwegian School of Economics (NHH) - Department of Finance

Thorsten Hens

University of Zurich - Department of Banking and Finance; Norwegian School of Economics and Business Administration (NHH); Swiss Finance Institute

Peter Wohrmann

University of Zurich - Swiss Banking Institute (ISB)

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

Haug, Jørgen and Hens, Thorsten and Wohrmann, Peter, Risk Aversion in the Large and in the Small (June 23, 2011). Swiss Finance Institute Research Paper No. 11-24. Available at SSRN: https://ssrn.com/abstract=1876529 or http://dx.doi.org/10.2139/ssrn.1876529

Jørgen Haug

Norwegian School of Economics (NHH) - Department of Finance ( email )

Helleveien 30
N-5045 Bergen
Norway

Thorsten Hens (Contact Author)

University of Zurich - Department of Banking and Finance ( email )

Plattenstrasse 32
Zurich, 8032
Switzerland
+41-44 634 37 06 (Phone)

Norwegian School of Economics and Business Administration (NHH)

Helleveien 30
Bergen, 5045
Norway

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Peter Wohrmann

University of Zurich - Swiss Banking Institute (ISB) ( email )

Plattenstrasse 14
CH-8032 Zurich, Zurich 8032
Switzerland

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