Risk Aversion and the Elasticity of Marginal Utility with Respect to Consumption
Consumer Interests Annual, v. 49, 2003
13 Pages Posted: 24 Jun 2015
Date Written: March 23, 2003
Hypothetical questions were used with 252 students at two universities to elicit values of relative risk aversion and of the elasticity of marginal utility with respect to consumption. Conceptually, the magnitude of these two utility function parameters are plausibly similar, but there was not a significant correlation in the expected direction. Females had significantly higher risk aversion than males, but there was no difference in the elasticity. Implications for financial decisions are discussed.
Keywords: risk aversion, risk tolerance, intertemporal elasticity, saving, financial planning, life cycle savings, expected utility
JEL Classification: D14, D81, D91, E21
Suggested Citation: Suggested Citation