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Department of Business and Management Science, Norwegian School of Economics (NHH) Discussion Papers, Department of Business and Management Science, Norwegian School of Economics (NHH)

No 2011/12:
Risk Aversion in the Large and in the Small

J°rgen Haug (), 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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