Revealed Heterogeneity in Risk Preference

28 Pages Posted: 16 Nov 2021 Last revised: 17 Nov 2021

See all articles by Bin Miao

Bin Miao

Renmin University of China, School of Economics

Shuangyu Yang

National University of Singapore (NUS), Department of Economics

Songfa Zhong

National University of Singapore (NUS) - Department of Economics

Date Written: November 15, 2021

Abstract

We propose a nonparametric revealed preference test to identify heterogeneity in risk preference. Our method is simple and applicable to choice environments with revealed preference features. We further develop two measures of preference heterogeneity at both the individual and group levels, and apply them to examine the experimental data of Choi et al. (2014), whereby subjects in a representative sample make portfolio choices under budget constraints. We find that preference heterogeneity is linked to individual rationality, and males exhibit greater heterogeneity than females. Our study supports revealed preference analysis as a powerful tool in understanding economic behavior beyond individual rationality.

Keywords: revealed preference analysis; heterogeneity; risk preference; experiment

JEL Classification: C91, D81

Suggested Citation

Miao, Bin and Yang, Shuangyu and Zhong, Songfa, Revealed Heterogeneity in Risk Preference (November 15, 2021). Available at SSRN: https://ssrn.com/abstract=3963953 or http://dx.doi.org/10.2139/ssrn.3963953

Bin Miao

Renmin University of China, School of Economics ( email )

China

Shuangyu Yang (Contact Author)

National University of Singapore (NUS), Department of Economics ( email )

Singapore
Singapore

Songfa Zhong

National University of Singapore (NUS) - Department of Economics ( email )

1 Arts Link, AS2 #06-02
Singapore 117570, Singapore 119077
Singapore

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