Discussion Papers, Department of Business and Management Science, Norwegian School of Economics (NHH)
Risk Aversion in the Large and in the Small
(), Thorsten Hens
() and Peter W÷hrmann
Abstract: Estimates of agents' risk aversion differ between market
studies and experimental studies. We demonstrate that the estimates can be
reconciled through consistent treatment of agents' tendency for narrow
framing, regarding integration of background wealth as well as across risky
outcomes: Risk aversion is similar whenever similar degrees of narrow
framing is assumed in either setting.
Keywords: Risk aversion; narrow framing; background wealth; laboratory experiments; market studies; equity premium puzzle; (follow links to similar papers)
JEL-Codes: D81; G11; G12; (follow links to similar papers)
18 pages, June 28, 2011
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