Higher Order Risk Attitudes, Demographics, And Financial Decisions

The authors conduct an experiment to study the prevalence of the higher order risk attitudes of prudence and temperance, in a large demographically representative sample, as well as in a sample of undergraduate students. Participants make pairwise choices between lotteries of the form proposed by Eeckhoudt and Schlesinger (2006). The choices in these lotteries isolate prudent from imprudent, and temperate from intemperate, behavior. They relate individuals' risk aversion, prudence, and temperance levels to demographics and financial decisions. They observe that the majority of individuals' decisions are consistent with risk aversion, prudence, and temperance, in both the student and the demographically representative sample.

Provided by: Tilburg University Topic: CXO Date Added: Apr 2011 Format: PDF

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