Higher Order Risk Attitudes, Demographics, and Financial Decisions
نویسندگان
چکیده
We study the prevalence of the higher order risk attitudes of prudence and temperance, in a large demographically representative sample, as well as in a sample of undergraduate students. Participants make pairwise choices between lotteries of the form proposed by Eeckhoudt and Schlesinger (2006). The choices in these lotteries isolate prudent from imprudent, and temperate from intemperate, behavior. We relate individuals’ risk aversion, prudence, and temperance levels to demographics and financial decisions. We observe that the majority of individuals’ decisions are consistent with risk aversion, prudence, and temperance, in both the student and the demographically representative samples. An individual’s level of prudence is predictive of his wealth, saving and borrowing behavior outside of the experiment, while temperance predicts portfolio choices. Estimates of parametric specifications of risk and prudence parameters are compared to key thresholds of
منابع مشابه
Some Determinants of Corporate Financing Decisions: Evidence from the Listed Companies in Tehran Stock Exchange
The aim of this empirical study is to explore the trade-off model and pecking order model of capital structure. The investigation is performed using panel data procedures for a sample of 76 firms listed in Tehran Stock Exchange during 2007-2010.The study employs OLS regression model in examining the capital structure of firms in Iran. The study employs variables reflecting differing theoretical...
متن کاملThe role of investors’ objective financial knowledge on the assessment of risk disclosures in mix mutual funds advertisements in Iran (The evidence of mutual funds in Iran)
Financial literacy of investors reduces uncertainty on future decisions and increases predictability of investment policies in financial markets. Thus, the lack of clear information on financial markets is a determining factor in the arrival of domestic and foreign capitals and their quick exit in case of crisis. The lack of transparency and basic knowledge on decisions and failure to provide r...
متن کاملHigher-Order Risk Attitudes toward Correlation
Higher-order risk attitudes other than risk aversion (e.g., prudence and temperance) play vital roles both in theoretical and empirical work. While the literature has mainly focused on how they entail a preference for combining “good” outcomes with “bad” outcomes, We consider here an alternative approach which relates higher-order risk attitudes to the sign of correlation. The theoretical resul...
متن کاملConfucian Values and Attitudes Toward Time Discounting and Financial Risk
This paper examines the influence of Confucian values and attitudes on individual levels of time discounting and financial risk. We recruited equal numbers of Chinese and Canadian subjects from a Canadian university and asked them to make decisions in discounting and risk aversion tasks. The behaviour reflected from their decisions is further investigated by comparing their scores on the Chines...
متن کاملRisk aversion in financial decisions : A nonextensive approach ∗
The sensitivity to risk that most people (hence, financial operators) feel affects the dynamics of financial transactions. Here we present an approach to this problem based on a current generalization of Boltzmann-Gibbs statistical mechanics. An important question in the theory of financial decisions is how to take into account those psychological attitudes of human beings that produce signific...
متن کامل