Measuring Multivariate Risk Preferences

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