FIGURE I - uploaded by Robert Barsky
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Individuals' preferences underlying most economic behavior are likely to display substantial heterogeneity. This paper reports on direct measures of preference parameters relating to risk tolerance, time preference, and intertemporal substitution. These experimental measures are based on survey respondents' choices in hypothetical situations. The q...
Citations
... One methodology employs lotteries or gambles across lifetime income (e.g. Barsky et al. 1997), while another approach derives an individual's risk preference through survey data (e.g. Grable 1999;Grable, Lyons, and Heo 2019). ...
Do government policies during the COVID-19 pandemic affect investors’ risk aversion, as proxied by the variance premium? To answer this question, this study examines data regarding government responses from thirteen countries. The empirical analysis indicates that government interventions were not able to substantially reduce variance risk premium in international equity markets. The results also show that economic support policies, containment, and closure regulations, and health system interventions all played a significant role in shaping equity variance risk price.
... The second part of the questionnaire displays questions of risk aversion. Barsky et al. (1997), in a Health and Retirement survey conducted in the United States, described the wording of the questions used regularly in empirical research (Kimball et al., 2008). The main idea is that the question should propose a situation that involves a risky choice involving the future life cycle according to the standard approach to consumer behavior. ...
Purpose
Financial literacy is generally seen as an important factor explaining a broader set of investment behaviors. In the context of a weak financial knowledge in France, this article focuses on the particular situation of Generation Z (individuals born after 1995) and more particularly management students likely to be involved in financial decisions in the near future.
Design/methodology/approach
The analysis is based on a survey conducted in the Fall of 2019, through a questionnaire distributed to 300 students enrolled in a French business school.
Findings
The results indicate that financial knowledge is poor for students who do not follow a specialized course in finance. This research also demonstrates the importance of risk behavior, showing that risk adverse students are also those with the lowest level of financial literacy.
Originality/value
This article contributes to the academic literature by focusing on students in France. It is the first study to examine Gen Z financial literacy and its implications. It raises awareness on the importance of financial education in the education curriculum.
... Women are generally found to be more risk averse than men in financial decision-making. For example, women have been found to be more risk averse in financial decisions in downside risk environments (Comeig et al. 2015), with respect to the pension allocation decision (Bajtelsmit et al. 1999), to have less risky asset portfolios than men (Halko et al. 2012;Jianakoplos and Bernasek 1998), and to report lower willingness to accept financial risk (Barsky et al. 1997). Similarly, laboratory experimental tests also showed that women are more risk averse than men in financial decision-making (See Charness and Gneezy 2012, Croson and Gneezy 2009, and Eckel and Grossman 2008. ...
... Additionally, the empirical research of Bajtelsmit et al. (1999) found women more risk averse than men in financial decisions on pension allocation. Jianakoplos and Bernasek (1998) and Halko et al. (2012) found women had less risky asset portfolios than men, and Barsky et al. (1997) showed that women reported lower willingness to accept financial risk. ...
Access to credit is key to succeed in business. Theoretical models of credit under asymmetric information classify borrowers and grant or deny credit, typically based on incentive-compatible contracts with collateral. However, if women are particularly risk averse, female borrowers may be wrongly classified and denied credit. We conduct in three countries a laboratory experiment to study this systematic gender difference. Results show that incentive-compatible contracts with collateral fail to disclose women’s private information, while disclosing men’s private information. We suggest that banks should incorporate the gender difference in risk attitudes to avoid the glass ceiling in women’s access to credit.
... For instance, the following studies estimate that the mean ranges from 0.6 to 15.8. Using Health and Retirement Survey data, Barsky et al. (1997) estimate that RRA takes a value from 0.7 to 15.8. Using the Michigan Health and Retirement Study, Halek and Eisenhauer (2001) estimate it as 3.74 and insist that individuals become more risk-averse as they age. ...
We analyze how increasing longevity affects economic development based on differences in the risk attitudes of young and old individuals. We construct an overlapping generations model given an economy grows with the help of the capital and intermediate goods produced by individual activities. The outcomes of these activities are stochastically determined. We analytically and numerically show that increasing longevity hinders capital accumulation in the economy when old individuals are more risk-averse than young individuals. Thus, if old individuals are less willing to take risks in the economy, population aging will consequently slow economic growth.
... In this way, we can interpret how behavioural economics and finance can be shaped by culture with the guidance of cultural psychology. Martino et al. 2010;Sokol-Hessner, Camerer, & Phelps, 2013), genetics (Cesarini et al. 2009a(Cesarini et al. , 2009bCesarini et al. 2010;Zhong, Chew et al. 2009;Cesarini, Johannesson, Magnusson and Wallace 2011), gender, age, religion and race (Barsky et al. 1997), education (Grable & Joo 1997), culture (Wang, Rieger, & Hens, 2017) and many other variables have been observed to be effective in the financial decision-making process. It is extremely important to understand this process and to analyze people's economic and financial behavior for predicting the individual and general results of financial behavior. ...
Behavioral sciences generally tend to assume human behavior as universal and to ignore systematic differences in how people perceive life (Levinson and Peng, 2004). Since the 1990s, some cultural psychologists have started to show that the way people perceive basic events and the reflections of this perception in the decision-making process are systematically affected by culture (Ji et al, 2001; Nisbett et al., 2001). Three important theories help social psychologists to explain these systematic cultural differences: individualism-collectivism theory (Hofstede, 1980; Triandis, 1995) and dependent, independent self theory (Markus and Kitayama, 1991) are powerful concepts in understanding social phenomenons. The third theory, based on the cognitive explanations underlying cultural differences, is the model developed by Nisbett (Nisbett et al., 2001) and sheds light on how culture can affect the way people perceive economic and financial concepts. In light of the mentioned theories, it is possible to predict the fundamental differences in financial forecasts, economic decisions and owned cognitive bias through the world perception of the individuals. In this way, we can interpret how behavioural economics and finance can be shaped by culture with the guidance of cultural psychology.
Traditional economic models do not take into consideration ownership of the investment amount and the investment-gambling dilemma. Oppositely new generation behavioral economics, emotions (De Martino et al. 2010; Sokol-Hessner, Camerer, & Phelps, 2013), genetics (Cesarini et al. 2009a, 2009b; Cesarini et al. 2010; Zhong, Chew et al. 2009; Cesarini, Johannesson, Magnusson and Wallace 2011), gender, age, religion and race (Barsky et al. 1997), education (Grable & Joo 1997), culture (Wang, Rieger, & Hens, 2017) and many other variables have been observed to be effective in the financial decision-making process. It is extremely important to understand this process and to analyze people's economic and financial behavior for predicting the individual and general results of financial behavior. As a new concept, cultural finance (Breuer and Quinten, 2009) mainly deals with the differences between eastern and western cultures and tries to create hetero-cultural-economicus by taking support from behavioral economics that transform homo-economicus of traditional theories into hetero-economicus. According to mentioned priorities, the main purpose of our study is to explore behavior sets' and cultural variations' influence on the individual's perspective on gambling and investment decisions.
... where θ 1 and θ 2 are the loss aversion parameter for the smaller stake $25 and the larger stake $100, respectively. 3 Because preference parameters can be sensitive to the size of stakes (Barsky et al., 1997), we compare θ 1 and θ 2 , and the paired t-test shows that the loss aversion parameter θ 1 for the smaller stake is significantly smaller than the one for the larger stake (2.81 vs. 2.96, p <.001). The magnitude of this difference, however, is relatively small. ...
... Notre questionnaire est basé sur les études de Lusardi et Mitchell (2008 qui permettent une traduction des concepts précédents en mesures de la littératie financière ainsi que sur l'étude de Barsky et al. (1997) pour la détermination de l'aversion au risque. Lusardi et Mitchell ont ainsi conçu un ensemble standard de questions autour de ces concepts en les appliquant dans de nombreuses enquêtes. ...
La littératie financière est généralement considérée comme un facteur important permettant d'expliquer un ensemble plus large de comportements liés à l'investissement. Une enquête sur l'éducation financière du public en France laisse transparaitre le faible niveau de connaissance. Dans ce contexte de faible connaissance financière en France, notre article s'intéresse à la situation particulière de la génération Z (individus nés après 1995) et plus particulièrement aux étudiants en management susceptibles d'être amenés à prendre des décisions financières dans un avenir proche. Nos résultats indiquent que la connaissance financière est faible pour les étudiants qui ne suivent pas un parcours spécialisé en finance. Le parcours scolaire et universitaire est prépondérant dans l'éducation financière.
Financial literacy is generally seen as an important factor explaining a broader set of investment behaviors. A survey on public financial education in France reveals the low level of knowledge. In this context of a weak financial knowledge in France, this article focuses on the particular situation of generation Z (individuals born after 1995) and more particularly management students likely to be involved in financial decisions taking in the near future. Our results indicate that financial knowledge is poor for students who do not follow a specialized course in finance. The secondary level education and the university path are predominant in financial education.
... However, the same coherence on the η values is not found in the surveys methods applications. Indeed, in this case, while some authors reach estimates of η less than 1 (Amiel et al., 1999), others arrive at η greater than 1 (Carlsson et al., 2005) and still others to measures of η that fall in the 3-5 range (Barsky et al., 1997;Atkinson et al., 2009). The same is true for the applications of the macro-econometric approach, where values of 1/η are obtained in the range 0.1-1.1 (Attanasio and Weber, 1989;Attanasio, 1993;Bundell et al., 1994;Berloffa, 1997;Yogo, 2004). ...
Purpose
The purpose of the paper is to characterize an evaluation protocol of the social discount rate (SDR). This is based on the social rate of time preference (SRTP) principles, according to which the investment selection process must tend to maximize the utility of the community.
Design/methodology/approach
The theoretical reference of the evaluation protocol is represented by the Ramsey formula. It is widely used in many countries with advanced economics for the SRTP estimation, through the maximization of the Social Welfare Function (SWF).
Findings
The protocol structure and the protocol applications to the Italian and US economies explain how the SDR value is influenced by the socio-economic structure of the single nation.
Research limitations/implications
The strong variability of the results of the SDR according to the theoretical approach of reference and the operating path that follows can lead to judgments decidedly divergent on the acceptability of the public project, hence, the important policy implications for the entire allocation process of public resources.
Practical implications
The applications allow to highlight the important operational problems that must be resolved with regard to the choice of the time intervals of the evaluations, as well as logical-operational tools to be used to express estimates of parameters.
Social implications
They are relevant in relation to the effects of a more equitable allocation of the resources.
Originality/value
The protocol for the SDR estimation is based both on solid disciplinary principles and on objective data of non-complex availability and representative of the economic and socio-demographic context of the country in which the decision-making process is implemented.
... 6 Kitagawa and Hauser (1973), Luft (1978), Hurd (1987), Hurd and Wise (1989), Rodgers (1991), Ettner (1996), Power et al. (1996), Feinstein (1992, Barsky et al. (1997), Bosma et al. (1997, Thomas and Strauss (1997), Backlund et al. (1999), Ecob and Smith (1999), Fitzpatrick andDollamore (1999), Chandola (2000), Ross and Mirowsky (2000), Seeman et al. (2002), Adams et al. (2003), Adams et al. (1999), Adams et al. (2003), Currie (2009), Chin (2010, and Kuehnle (2014). 7 Goldman (2001), Currie and Stabile (2003), Propper et al. (2007), Cunha and Heckman (2007), Currie et al. (2008), Jones and Wildman (2008), Khanam et al. (2009), Currie (2009), Chin (2010, Reinhold and Jürges (2012), Kurk (2012), Apouey and Geoffard (2013), Kuehnle (2014), and Pickett and Wilkinson (2015). ...
The impact of housing hazards on health outcomes is becoming a major issue especially given the recent and on-going reviews of energy legislation in many European countries. A large body of epidemiological literature argues that fuel poverty – a frequently debated example of a housing hazard involving low indoor temperatures – is associated with heightened health risks.
By using a large scale nationally representative dataset, I seek in this article to delve into this alleged association and uncover a causal relationship between fuel poverty and self-assessed health. Coming from an economics standpoint, I used a panel approach based on an instrumental fixed-effects model which allow me to analyse causality. I used both objective and subjective fuel-poverty indicators.
The results show that there is a significant causal relationship between fuel poverty and self-assessed health status. The estimated causality is exacerbated when subjective fuel-poverty indicators are used. The results also show that the negative impact of fuel poverty on health is deferred, meaning that fuel poverty takes time to manifest itself in terms of poor health.
In policy terms, this study adds to the debate on investing in housing energy-efficiency schemes to reduce fuel poverty and thereby improve health outcomes. It also lends support to the argument according to which improving housing conditions to curb fuel poverty is a lever for reducing pubic expenditures on health care.
... To put the threshold risk aversion parameters defined above into scope, we end this section with a brief and incomplete review of the empirical literature on individuals' risk aversion. A large part of the literature, including, among many others, Barsky et al. (1997) and Kimball et al. (2008) is based on laboratory experiments or hypothetical survey questions; field research in this area has been carried out by, for instance, Binswanger (1981). Meyer and Meyer (2005), to whom we also refer for an overview, perform a meta-analysis of past studies on the real-world risk aversion and point out that risk aversion for consumption may be up to five times higher than risk aversion for wealth. ...
This article proposes implied risk aversion as a rating methodology for retail structured products. Implied risk aversion is based on optimal expected utility risk measures as introduced by Geissel et al. (Stat Risk Model 35(1–2):73–87, 2017) and, in contrast to standard V@R-based ratings, takes into account both the upside potential and the downside risks of such products. In addition, implied risk aversion is easily interpreted in terms of an individual investor’s risk aversion: a product is attractive for an investor if his individual relative risk aversion is smaller than the product’s implied risk aversion. We illustrate our approach in a case study with more than 15,000 short-term warrants on DAX that highlights some differences between our rating system and the traditional V@R-based approach.
