Risk Preferences Are Not Time Preferences: Balancing on a Budget Line: Comment

Thomas Epper and Helga Fehr-Duda

American Economic Review, 2015, vol. 105, issue 7, 2261-71

Abstract: In a recent experimental study of intertemporal risky decision making, Andreoni and Sprenger (2012) find that subjects exhibit a preference for intertemporal diversification, which is inconsistent with discounted expected utility theory. It was claimed that their results are also at odds with models involving probability weighting, such as rank-dependent utility and cumulative prospect theory. Here we demonstrate, however, that rank-dependent probability weighting explains intertemporal diversification if decision makers care about portfolio risk. Moreover, we provide a unified account of all of Andreoni and Sprenger's key findings. (JEL C91, D81, D91)

JEL-codes: C91 D81 D91 (search for similar items in EconPapers)
Date: 2015
Note: DOI: 10.1257/aer.20130420
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (32)

Downloads: (external link)
http://www.aeaweb.org/articles.php?doi=10.1257/aer.20130420 (application/pdf)
https://www.aeaweb.org/aer/ds/10507/20130420_ds.zip (application/zip)
https://www.aeaweb.org/aer/app/10507/20130420_app.pdf (application/pdf)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:105:y:2015:i:7:p:2261-71

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().