Asset Integration and Attitudes to Risk: Theory and Evidence

Authors

Steffen Andersen, Copenhagen Business School
James Cox, Georgia State University
Glenn Harrison, Georgia State University
Morten Lau, Copenhagen Business School
Elisabet Rutstrom, Stockholm School of Economics
Vjollca Sadiraj, Georgia State University

Document Type

Article

Publication Date

10-1-2017

Abstract

We provide evidence that choices over small stakes bets are consistent with assumptions of some payoff calibration paradoxes. We then exploit the existence of detailed information on individual wealth of our experimental subjects in Denmark, and directly estimate risk attitudes and the degree of asset integration. We discover that behavior is consistent with partial, rather than full, asset integration. The implied risk attitudes from estimating these specifications indicate risk premia and certainty equivalents that are a priori plausible. This theory and evidence suggest one constructive solution to payoff calibration paradoxes.

Comments

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Recommended Citation

Andersen, Steffen; Cox, James; Harrison, Glenn; Lau, Morten; Rutstrom, Elisabet; and Sadiraj, Vjollca, "Asset Integration and Attitudes to Risk: Theory and Evidence" (2017). ExCEN Working Papers. 19.
https://scholarworks.gsu.edu/excen_workingpapers/19