Is Self-Reported Risk Aversion Time Variant?

SeEun Jung () and Carole Treibich ()

No 2014-22, THEMA Working Papers from THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise

Abstract: We examine a Japanese Panel Survey in order to check whether self-reported risk aversion varies over time. In most panels, risk attitude variables are collected only once (found in only one survey wave), and it is assumed that self-reported risk aversion reflects the individual's time-invariant component of preferences to- ward risk. Nonetheless, the question could be asked as to whether the financial and macro shocks a person faces over his lifetime modify his risk aversion. Our em- pirical analysis provides evidence that risk aversion is composed of a time-variant part and shows that the variation cannot be ascribed to measurement error or noise given that it is related to income shocks. Taking into account the fact that there are time-variant factors in risk aversion, we investigate how often it is preferable to collect the risk aversion measure in long panel surveys. Our result suggests that the best predictor of current behavior is the average of risk aversion, where risk aversion is collected every two years. It is therefore advisable for risk aversion measures to be collected every two years in long panel surveys.

Keywords: Risk Aversion; Panel Data (search for similar items in EconPapers)
JEL-codes: C33 D31 J11 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-cbe and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Is Self-Reported Risk Aversion Time Variant? (2015)
Working Paper: Is Self-Reported Risk Aversion Time Variant? (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:ema:worpap:2014-22

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