Measuring Multivariate Risk Preferences

49 Pages Posted: 1 Aug 2015 Last revised: 1 Apr 2016

See all articles by Sebastian Ebert

Sebastian Ebert

Frankfurt School of Finance & Management gemeinn├╝tzige GmbH

Gijs van de Kuilen

Tilburg University

Date Written: July 30, 2015

Abstract

We measure risk preferences for decisions that involve more than a single monetary attribute. According to theory, the multivariate risk preferences correlation aversion, cross-prudence (coskewness preference) and cross-temperance (cokurtosis aversion) determine how univariate risk preferences over attributes co-vary and interact. We obtain model-free measurements of these multivariate risk preferences in three economic domains, viz., time preferences, social preferences, and preferences over waiting time. This first systematic empirical exploration of multivariate risk preferences provides evidence for assumptions made in economic models on inequality, labor, time preferences, saving, and insurance.

Keywords: Multivariate Risk Preferences, Correlation Aversion, Cross-Prudence, Coskewness, Time Preferences, Social Preferences

JEL Classification: D03, D81

Suggested Citation

Ebert, Sebastian and van de Kuilen, Gijs, Measuring Multivariate Risk Preferences (July 30, 2015). Available at SSRN: https://ssrn.com/abstract=2637964 or http://dx.doi.org/10.2139/ssrn.2637964

Sebastian Ebert (Contact Author)

Frankfurt School of Finance & Management gemeinn├╝tzige GmbH ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

Gijs Van de Kuilen

Tilburg University ( email )

P.O. Box 90153
Tilburg, DC Noord-Brabant 5000 LE
Netherlands

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