Testing theories of financial decision making

Christopher Chambers, Federico Echenique and Kota Saito

Department of Economics, Working Paper Series from Department of Economics, Institute for Business and Economic Research, UC Berkeley

Abstract: We describe the observable content of some of the most widely used models of decision under uncertainty: models of translation invariant preferences. In particular, we characterize the models of variational, maxmin, constant absolute risk aversion, and constant relative risk aversion utilities. In each case we present a revealed preference axiom that is satisfied by a dataset if and only if the dataset is consistent with the corresponding utility representation. We test our axioms using data from an experiment on financial decisions.

Keywords: homotheticity; revealed preference; translation invariance; uncertainty (search for similar items in EconPapers)
Date: 2016-04-12
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Citations: View citations in EconPapers (6)

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