[Research Seminar] IRISK: “Higher order risk preferences and economic decision” S. TRAUTMANN – Univiersity of Heidelberg
Speaker: Stephan TRAUTMANN
University of Heidelberg
Co-authored with Y. XU, M. BOKSEM, C. N. NOUSSAIR, G. VAN DE KUILEN & A. SANFEY
Date and Location – Friday September 23rd 2022 from 13:30 to 14:30
in Lille campus and on Zoom
Under expected utility, individuals’ higher risk attitudes prudence and temperance determine savings and investment decisions. Prudent individuals save more when their future income becomes more uncertain; temperate individuals prefer less risky investment in the presence of greater background risks. In experimental savings and investment tasks, we find clear evidence for both predictions for the average individual. We also measure individuals’ (higher-order) risk attitudes directly, using two different elicitation methods. We find that individual prudence measures explain the strength of the precautionary saving, while individual temperance measures do not aid explaining investment. The two elicitation methods yield strongly correlated risk preference measures for risk aversion, prudence and temperance.