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Asset integration and attitudes to risk : theory and evidence.

Andersen, Steffen and Cox, James C. and Harrison, Glenn W. and Lau, Morten I. and Rutström, E. and Sadiraj, V. (2018) 'Asset integration and attitudes to risk : theory and evidence.', Review of economics and statistics. .

Abstract

We provide evidence that choices over small stakes bets are consistent with assumptions of some payoff calibration paradoxes. We then exploit the existence of detailed information on individual wealth of our experimental subjects in Denmark, and directly estimate risk attitudes and the degree of asset integration. We discover that behavior is consistent with partial, rather than full, asset integration. The implied risk attitudes from estimating these specifications indicate risk premia and certainty equivalents that are a priori plausible. This theory and evidence suggest one constructive solution to payoff calibration paradoxes.

Item Type:Article
Full text:(AM) Accepted Manuscript
First Live Deposit - 04 October 2017
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Status:Peer-reviewed
Publisher Web site:https://doi.org/10.1162/rest_a_00719
Record Created:04 Oct 2017 11:13
Last Modified:30 Jan 2018 09:57

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