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 toward risk : theory and evidence.', Review of economics and statistics., 100 (5). pp. 816-830.
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.
|Full text:||(AM) Accepted Manuscript|
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|Publisher Web site:||https://doi.org/10.1162/rest_a_00719|
|Publisher statement:||© 2018 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.|
|Date accepted:||02 October 2017|
|Date deposited:||04 October 2017|
|Date of first online publication:||12 January 2018|
|Date first made open access:||04 October 2017|
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