Economics, Econometrics and Finance
8 years ago

New study reveals surprising truth about relative risk aversion in society!

International Review of Economics & Finance
Is relative risk aversion greater than one?
E. Kwan Choi, Carmen F. Menezes

Paper Summary

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The article explores whether people are more, less, or equally risk-averse when making decisions. Different theories and data have conflicting views on this. The study shows that the exact level of risk aversion can be calculated from the probability premium if it stays the same. By looking at how much people are willing to pay for a chance to win, we can estimate the minimum level of risk aversion.