Subjective Measures of Risk Aversion, Fixed Costs, and Portfolio Choice
Arie Kapteyn () and
DNB Working Papers from Netherlands Central Bank, Research Department
The paper investigates risk attitudes among different types of individuals. We use several different measures of risk attitudes, including questions on choices between uncertain income streams suggested by Barsky et al. (1997) and a number of ad hoc measures. As in Barsky et al. (1997) and Arrondel and Calvo-Pardo (2002), we first analyse individual variation in the risk aversion measures and explain them by background characteristics (both â€œobjective characteristics and other subjective measures of risk preference). Next we incorporate the measured risk attitudes into a household portfolio allocation model, which explains portfolio shares, while accounting for incomplete portfolios and fixed costs. Our results show that a measure based on factor analysis of answers to a number of simple risk preference questions has the most explanatory power. The Barsky et al. (1997) measure has less explanatory power than this â€œa-theoretical measure. We provide a discussion of the reasons for this finding. Fixed costs turn out to provide an economically and statistically highly significant explanation for incomplete portfolios.ÂÂ ÂÂ ÂÂ ÂÂ ÂÂ ÂÂ ÂÂ ÂÂ ÂÂ ÂÂ ÂÂ
Keywords: Risk Aversion; Portfolio Choice; Subjective Measures; Econometric Models; Fixed ÂÂ Costs. (search for similar items in EconPapers)
JEL-codes: C5 C9 D12 G11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (https://www.dnb.nl/binaries/Working%20paper%20216_tcm46-220406.pdf [301 Moved Permanently]--> https://www.dnb.nl/binaries/working%20paper%20216_tcm46-220406.pdf)
Journal Article: Subjective measures of risk aversion, fixed costs, and portfolio choice (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:dnb:dnbwpp:216
Access Statistics for this paper
More papers in DNB Working Papers from Netherlands Central Bank, Research Department Contact information at EDIRC.
Bibliographic data for series maintained by Richard Heuver ().