Risk Aversion and the Subjective Time Discount Rate: A Joint Approach
In this paper we analyze a large sample of individual responses to six lottery questions. Wederive a simultaneous estimate of risk aversion ? and the time preference discount rate ? perindividual. This can be done because the consumption of a large prize is smoothed over a largertime period. It is found that ? and ? strongly vary over individuals, while they are negativelycorrelated with a correlation coefficient of -.3. Furthermore we explain ? and ? by income,age, gender, entrepreneurship and an obesity index. Very significant effects are found. If weexplain ? in a simple model where time di... Mehr ...
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Dokumenttyp: | doc-type:workingPaper |
Erscheinungsdatum: | 2003 |
Verlag/Hrsg.: |
Amsterdam and Rotterdam: Tinbergen Institute
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Schlagwörter: | ddc:330 / D12 / D80 / D90 / E21 / Expected Utility / Risk Aversion / Time Preference / Lotteries / Hypothetical Questions / Glücksspiel / Erwartungsnutzen / Risikoaversion / Zeitpräferenz / Test / Theorie / Niederlande |
Sprache: | Englisch |
Permalink: | https://search.fid-benelux.de/Record/base-27638915 |
Datenquelle: | BASE; Originalkatalog |
Powered By: | BASE |
Link(s) : | http://hdl.handle.net/10419/85954 |
In this paper we analyze a large sample of individual responses to six lottery questions. Wederive a simultaneous estimate of risk aversion ? and the time preference discount rate ? perindividual. This can be done because the consumption of a large prize is smoothed over a largertime period. It is found that ? and ? strongly vary over individuals, while they are negativelycorrelated with a correlation coefficient of -.3. Furthermore we explain ? and ? by income,age, gender, entrepreneurship and an obesity index. Very significant effects are found. If weexplain ? in a simple model where time discounting is ignored, we find completely differentestimates for ? . We conclude that in the case of lotteries with big prizes a simultaneous estimateof ? and ? is needed in order to avoid misspecification.