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Measuring Risk Aversion
Author(s): Donald J. Meyer;Jack Meyer
Source:
Journal:Foundations and Trends® in Microeconomics
ISSN Print:1547-9846, ISSN Online:1547-9854
Publisher:Now Publishers
Volume 2 Number 2,
Document Type: Article
Pages: 97 (107-203)
DOI: 10.1561/0700000006
Abstract: The purpose of the survey is to summarize, discuss, and interpret published research concerning the risk aversion of decision makers who maximize expected utility. In doing this, two points are emphasized. First, any measure of risk aversion is specific to the particular outcome variable over which the measure is defined or estimated, and second when outcome variables are related, then their risk aversion measures are also related. These two points are used to show that a substantial portion of the reported variation in magnitudes and slopes of risk aversion measures from the research of the past forty years results from differences in the outcome variables, and when these differences are adjusted for, those findings are a quite consistent body of evidence.
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