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Anomalies - Risk aversion
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DOI：10.1257/jep.15.1.219.png)
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Abstract
En 中文
Economists ubiquitously employ a simple and elegant explanation for risk aversion: It derives from the concavity of the utility-of-wealth function within the expected-utility framework. We show that this explanation is not plausible in most applications, since anything more than economically negligible risk aversion over moderate stakes requires a utility-of-wealth function that is so concave that it predicts absurdly severe risk aversion over very large stakes. We present examples of how the expected-utility framework has misled economists, and why we believe a better explanation for risk aversion must incorporate loss aversion and mental accounting.
Keywords:
EQUITY PREMIUM PUZZLE
DECISION
UTILITY
CHOICE
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