 Nonparametric comparative revealed risk aversionJournal of Economic Theory, 2014, vol. 153, issue C, 569-616 Abstract: We introduce a nonparametric method to compare risk aversion of different investors based on revealed preference methods. Using Yaari's (1969) [50] definition of “more risk averse than”, we show that it is sufficient to compare the revealed preference relations of two investors. This makes the approach operational; the central rationalisability theorem provides strong support for this approach. We also provide a measure of economic significance to quantify the differences in risk aversion, which can also help to interpret differences in risk aversion in parametric models. The approach is an alternative or complement to parametric approaches and a robustness check. As a necessary first step towards this comparative approach we show how to test data for consistency with stochastic dominance relations, which can also be used to recover larger parts of preferences. We include an application to experimental data by Choi et al. (2007) [10,11] which demonstrates the potential of the comparative approach. Keywords: Comparative risk aversion; Experimental economics; Nonparametric analysis; Revealed preference; Risk preference (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:153:y:2014:i:c:p:569-616 DOI: 10.1016/j.jet.2014.07.015 Access Statistics for this article Journal of Economic Theory is currently edited by A. Lizzeri and K. Shell More articles in Journal of Economic Theory from Elsevier |
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