Demography of Risk Aversion

Halek, Martin; Eisenhauer, Joseph G.

doi:10.2307/2678130

Cited by 563 publications

(385 citation statements)

References 31 publications

(27 reference statements)

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“…It is far from clear that poor decision making by elders necessarily reflects some kind of cognitive impairment. It may well be that healthy older adults make "bad" decisions because their preferences or choice efficiencies are different from those of their younger peers (16)(17)(18)(19)(20).…”

mentioning

confidence: 99%

Like cognitive function, decision making across the life span shows profound age-related changes

Tymula

Belmaker²,

Ruderman³

et al. 2013

Proc. Natl. Acad. Sci. U.S.A.

258

278

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Significance Although largely unstudied, behavioral changes in decision making across the life span have implications for problems associated with poor decision making at different life stages, such as careless driving in adolescents and disadvantageous medical or financial decision making in older adults. We examine age-based differences in individual decision-making characteristics—choice consistency, rationality, and preferences for known and unknown risks—in 12- to 90-y-olds. We found that even the healthiest of elders show profoundly compromised decision making, and that risk attitudes show systematic changes across the life span that have important policy implications.

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mentioning

confidence: 99%

Like cognitive function, decision making across the life span shows profound age-related changes

Tymula

Belmaker²,

Ruderman³

et al. 2013

Proc. Natl. Acad. Sci. U.S.A.

258

278

View full text Add to dashboard Cite

show abstract

“…Moreover, the negative marginal effect of the age dummy is gradually amplified from -5.8 percent for the 'CEO is over 57 years old' dummy to -9.7 percent for the 'CEO is over 64 years old' dummy, while consistently remaining highly significant. 20 Empirical evidence on the relation between age and risk aversion shows that being age 65 or older dramatically increases one's risk aversion (Riley andChow 1992, Halek andEisenhauer 2001).…”

Section: Analysis Of Resultsmentioning

confidence: 99%

Why do firms adopt CEO stock options? Evidence from the United States

Tzioumis

2008

Journal of Economic Behavior & Organization

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This paper examines the determinants of stock option introduction as a part of CEO compensation in listed US firms during the 1994-2004 period. The results are consistent with agency costs and recruiting considerations, suggesting that firms do not adjust CEO compensation in order to address the 'investment horizon' problem. The findings also suggest that CEO stock option adoption is not necessarily influenced by the same factors that have been found in the literature to affect the level of CEO stock-option compensation and the adoption of broad-based stock-option incentives. Overall, the findings provide evidence for several theoretical predictions, thus adding to our understanding of managerial incentives.JEL Classification: J33, M12, M52

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“…The total effect of these estimates depends on the prospects under study. For prospects that entail a small probability of a large gain, one may find risk aversion to decrease with age, while in those that do not, increasing risk aversion is more likely, which is what is usually found (Pålsson 1996;Donkers and van Soest 1999;Halek and Eisenhauer 2001;Hartog et al 2002).…”

Section: Demographicsmentioning

confidence: 97%

A parametric analysis of prospect theory’s functionals for the general population

2009

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This article presents the results of an experiment that completely measures the utility function and probability weighting function for different positive and negative monetary outcomes, using a representative sample of N = 1,935 from the general public. The results confirm earlier findings in the lab, suggesting that utility is less pronounced than what is found in classical measurements where expected utility is assumed. Utility for losses is found to be convex, consistent with diminishing sensitivity, and the obtained loss-aversion coefficient of 1.6 is moderate but in agreement with contemporary evidence. The estimated probability weighting functions have an inverse-S shape and they imply pessimism in both domains. These results show that probability weighting is also an important phenomenon in the general population. Women and lower educated individuals are found to be more risk averse, in agreement with common findings. In contrast to previous studies that ascribed gender differences in risk attitudes solely to differences in the degree utility curvature, however, our results show that this finding is primarily driven by loss aversion and, for women, also by a more pessimistic psychological response toward the probability of obtaining the best possible outcome.

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Demography of Risk Aversion

Cited by 563 publications

References 31 publications

Like cognitive function, decision making across the life span shows profound age-related changes

Like cognitive function, decision making across the life span shows profound age-related changes

Why do firms adopt CEO stock options? Evidence from the United States

A parametric analysis of prospect theory’s functionals for the general population

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