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The Nature Of Risk Preferences
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Book Synopsis The Nature of Risk Preferences by : Levon Barseghyan
Download or read book The Nature of Risk Preferences written by Levon Barseghyan and published by . This book was released on 2012 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Handbook of the Economics of Risk and Uncertainty by : Mark Machina
Download or read book Handbook of the Economics of Risk and Uncertainty written by Mark Machina and published by Newnes. This book was released on 2013-11-14 with total page 897 pages. Available in PDF, EPUB and Kindle. Book excerpt: The need to understand the theories and applications of economic and finance risk has been clear to everyone since the financial crisis, and this collection of original essays proffers broad, high-level explanations of risk and uncertainty. The economics of risk and uncertainty is unlike most branches of economics in spanning from the individual decision-maker to the market (and indeed, social decisions), and ranging from purely theoretical analysis through individual experimentation, empirical analysis, and applied and policy decisions. It also has close and sometimes conflicting relationships with theoretical and applied statistics, and psychology. The aim of this volume is to provide an overview of diverse aspects of this field, ranging from classical and foundational work through current developments. Presents coherent summaries of risk and uncertainty that inform major areas in economics and finance Divides coverage between theoretical, empirical, and experimental findings Makes the economics of risk and uncertainty accessible to scholars in fields outside economics
Author :McAfee, R. Preston Publisher :London : Department of Economics, University of Western Ontario ISBN 13 :9780771405150 Total Pages :25 pages Book Rating :4.4/5 (51 download)
Book Synopsis The Nature of Risk Aversion by : McAfee, R. Preston
Download or read book The Nature of Risk Aversion written by McAfee, R. Preston and published by London : Department of Economics, University of Western Ontario. This book was released on 1984 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Risk Analysis in Theory and Practice by : Jean-Paul Chavas
Download or read book Risk Analysis in Theory and Practice written by Jean-Paul Chavas and published by Elsevier. This book was released on 2004-07-01 with total page 257 pages. Available in PDF, EPUB and Kindle. Book excerpt: The objective of Risk Analysis in Theory and Practice is to present this analytical framework and to illustrate how it can be used in the investigation of economic decisions under risk. In a sense, the economics of risk is a difficult subject: it involves understanding human decisions in the absence of perfect information. How do we make decisions when we do not know some of events affecting us? The complexities of our uncertain world and of how humans obtain and process information make this difficult. In spite of these difficulties, much progress has been made. First, probability theory is the corner stone of risk assessment. This allows us to measure risk in a fashion that can be communicated among decision makers or researchers. Second, risk preferences are now better understood. This provides useful insights into the economic rationality of decision making under uncertainty. Third, over the last decades, good insights have been developed about the value of information. This helps better understand the role of information in human decision making and this book provides a systematic treatment of these issues in the context of both private and public decisions under uncertainty. Balanced treatment of conceptual models and applied analysis Considers both private and public decisions under uncertainty Website presents application exercises in Excel
Book Synopsis The Time-varying Nature of Risk Aversion by : Dominique Pépin
Download or read book The Time-varying Nature of Risk Aversion written by Dominique Pépin and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Understanding Consumer Financial Behavior by : W. Fred van Raaij
Download or read book Understanding Consumer Financial Behavior written by W. Fred van Raaij and published by Springer. This book was released on 2016-07-15 with total page 286 pages. Available in PDF, EPUB and Kindle. Book excerpt: Government policies, marketing campaigns of banks, insurance companies, and other financial institutions, and consumers' protective actions all depend on assumptions about consumer financial behavior. Unfortunately, many consumers have no or little knowledge of budgeting, financial products, and financial planning. It is therefore important that organizations and market authorities know why consumers spend, borrow, insure, invest, and save for their retirement - or why they do not. Understanding Consumer Financial Behavior provides a systemic economic and behavioral approach to the way people handle their finances. It discusses the different types of financial behaviors consumers may engage in and explores the psychological explanations for their behavior and choices. This exciting new book is essential reading for scholars of marketing, finance, and management; financial professionals; and consumer policy makers.
Book Synopsis Risk, Uncertainty and Profit by : Frank H. Knight
Download or read book Risk, Uncertainty and Profit written by Frank H. Knight and published by Cosimo, Inc.. This book was released on 2006-11-01 with total page 401 pages. Available in PDF, EPUB and Kindle. Book excerpt: A timeless classic of economic theory that remains fascinating and pertinent today, this is Frank Knight's famous explanation of why perfect competition cannot eliminate profits, the important differences between "risk" and "uncertainty," and the vital role of the entrepreneur in profitmaking. Based on Knight's PhD dissertation, this 1921 work, balancing theory with fact to come to stunning insights, is a distinct pleasure to read. FRANK H. KNIGHT (1885-1972) is considered by some the greatest American scholar of economics of the 20th century. An economics professor at the University of Chicago from 1927 until 1955, he was one of the founders of the Chicago school of economics, which influenced Milton Friedman and George Stigler.
Book Synopsis Some Observations on the Nature of Risk Aversion by : Edi Karni
Download or read book Some Observations on the Nature of Risk Aversion written by Edi Karni and published by . This book was released on 1988 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Risk Assessment in the Federal Government by : National Research Council
Download or read book Risk Assessment in the Federal Government written by National Research Council and published by National Academies Press. This book was released on 1983-02-01 with total page 206 pages. Available in PDF, EPUB and Kindle. Book excerpt: The regulation of potentially hazardous substances has become a controversial issue. This volume evaluates past efforts to develop and use risk assessment guidelines, reviews the experience of regulatory agencies with different administrative arrangements for risk assessment, and evaluates various proposals to modify procedures. The book's conclusions and recommendations can be applied across the entire field of environmental health.
Book Synopsis Models of Risk Preferences by : Glenn W. Harrison
Download or read book Models of Risk Preferences written by Glenn W. Harrison and published by Emerald Group Publishing. This book was released on 2023-10-23 with total page 291 pages. Available in PDF, EPUB and Kindle. Book excerpt: Models of Risk Preferences collects studies that critically review alternatives to Expected Utility Theory from the perspective of experimental economics.
Book Synopsis Changing Risk Preferences at Older Ages by : James Banks
Download or read book Changing Risk Preferences at Older Ages written by James Banks and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Higher-order Risk Preferences by : Stefan Felder
Download or read book Higher-order Risk Preferences written by Stefan Felder and published by . This book was released on 2011 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Risk Analysis in Theory and Practice by : Jean-Paul Chavas
Download or read book Risk Analysis in Theory and Practice written by Jean-Paul Chavas and published by Elsevier. This book was released on 2004-06-04 with total page 258 pages. Available in PDF, EPUB and Kindle. Book excerpt: The objective of Risk Analysis in Theory and Practice is to present this analytical framework and to illustrate how it can be used in the investigation of economic decisions under risk. In a sense, the economics of risk is a difficult subject: it involves understanding human decisions in the absence of perfect information. How do we make decisions when we do not know some of events affecting us? The complexities of our uncertain world and of how humans obtain and process information make this difficult. In spite of these difficulties, much progress has been made. First, probability theory is the corner stone of risk assessment. This allows us to measure risk in a fashion that can be communicated among decision makers or researchers. Second, risk preferences are now better understood. This provides useful insights into the economic rationality of decision making under uncertainty. Third, over the last decades, good insights have been developed about the value of information. This helps better understand the role of information in human decision making and this book provides a systematic treatment of these issues in the context of both private and public decisions under uncertainty. Balanced treatment of conceptual models and applied analysis Considers both private and public decisions under uncertainty Website presents application exercises in Excel
Book Synopsis Decisions with Multiple Objectives by : Ralph L. Keeney
Download or read book Decisions with Multiple Objectives written by Ralph L. Keeney and published by Cambridge University Press. This book was released on 1993-07 with total page 596 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book describes how a confused decision maker, who wishes to make a reasonable and responsible choice among alternatives, can systematically probe their thoughts and feelings in order to make the critically important trade-offs between incommensurable objectives.
Book Synopsis Consistency of Higher Order Risk Preferences by : Cary A. Deck
Download or read book Consistency of Higher Order Risk Preferences written by Cary A. Deck and published by . This book was released on 2012 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Societal Risk Assessment by : Richard C. Schwing
Download or read book Societal Risk Assessment written by Richard C. Schwing and published by Springer. This book was released on 2013-12-19 with total page 363 pages. Available in PDF, EPUB and Kindle. Book excerpt: This volume constitutes the papers and discussions from a symposium on "Societal Risk Assessment: How Safe is Safe Enough?" held at the General Motors Research Laboratories on October 8-9, 1979. This symposium was the twenty-fourth in an annual series sponsored by the Research Laboratories. Initi ated in 1957, these symposia have as their objective the promotion of the interchange ofknowledge among specialists from many allied disciplines in rapidly developing or changing areas ofscience or technology. Attendees characteristically represent the academic, government, and industrial institutions that are noted for their ongoing activities in the particular area of interest. The objective of this symposium was to develop a balanced view of the current status of societal risk assessment's role in the public policy process and then to establish, if possible, future directions of research. Accordingly, the symposium was structured in two dimensions; certainty versus uncertainty and the subjective versus the objective. Furthermore, people representing extremely diverse discip lines concerned with the perception, quantification, and abatement of risks were brought together to provide an environment that stimulated the exchange of ideas and experiences. The keys to this exchange were the invited papers, arranged into four symposium sessions. These papers appear in this volume in the order of their presentation. The discussions that in turn followed from the papers are also included.
Book Synopsis Essays on Risk and Uncertainty by : Benjamin Keefer
Download or read book Essays on Risk and Uncertainty written by Benjamin Keefer and published by . This book was released on 2014 with total page 2 pages. Available in PDF, EPUB and Kindle. Book excerpt: Essays on Risk and Uncertainty: Insights from Behavioral Economics Sensitization, Excess Volatility, and Extraordinary Persistence It is well-documented that stock prices are more volatile than their underlying fundamentals. A consensus has emerged that time-varying risk-premia are the likely source of this excess volatility, but no consensus has emerged regarding the source of the time-varying risk-premia. Recent microeconomic research suggests that one likely source is that risk preferences are time-varying. This same literature also suggests that variation in risk preferences can be extraordinarily persistent, on the order of decades (see Malmendier, Tate, and Yan (2011)); however this persistence has not been explained by conventional models. In this paper, we derive a model to explain both excess volatility and extraordinary persistence. To do so, we draw from the literatures of medicine, psychology, and behavioral economics. Our basic framework is that people have adaptive emotions and that these adaptive emotions create adaptive risk-aversion. This process is called sensitization, which implies that people become more risk-averse after negative shocks (Kandel 2000). To conduct our analysis, we construct an overlapping generations model of the macroeconomy to study the effect of allowing agents to be sensitized to risk. We find two main results. First, the adaptive nature of risk preferences combined with the finite horizons of agents imply that economic activities, such as investment, are too risky on the intensive margin. Second, excess risk-intensity combined with the availability heuristic implies that agents undertake too little risk (too little investment) on the extensive margin. In order to characterize the optimal monetary policy, we follow Tirole (2006), who models risk through liquidity shocks, and we derive three policy implications for policymakers. First, diversification blunts the impact of time-varying risk aversion. As a result, there is a reason to think that equity financing, under which risk diversification is easier to achieve, leads to fewer risk distortions and faster steady-state growth. Second, countercyclical risk-aversion favors countercyclical monetary policy. Third, short-term asset purchases are shown to exacerbate risk distortions. In our model, monetary policy results in greater stabilization and faster growth when conducted through long-term asset purchases such as Quantitative Easing and Operation Twist. Reference Points, Leaders, and Organizational Culture The work of Akerlof and Kranton (2005) suggests that an organization's culture affects individual behavior by shaping preferences. Yet, within the economics literature, little is known regarding the properties of the optimal culture. In this paper, we use an agency setting to determine the cultural properties that best foster incentives. To do so, we break culture down into three components: a type of performance metric (either production or cost), an expected performance level or target (that serves as the reference point, following Koszegi and Rabin (2006, 2007)), and the degree to which an agent's effort influences the benchmark (referred to as acclimation by Koszegi and Rabin (2006, 2007)). Properties of culture affect agents' consideration of effort. Under the reference-dependent preferences of Koszegi and Rabin (2006, 2007), higher effort increases the likelihood of beating the agent's target (or reference point) as well as increasing the agent's reference point. The magnitudes of these two effects depend critically on the degree of acclimation, whereas the signs of these effects depend on the type of metric used. We present three general findings. First, organizations that rely on production metrics have incentives at least as strong as those relying on cost metrics. Second, the impact of acclimation depends critically on the type of metric used. Under cost metrics, higher acclimation leads to stronger incentives. Under production metrics, higher acclimation leads to weaker incentives. Third, the optimal culture is characterized by production metrics and unacclimating reference points, which we show have implications regarding organizational tenure policies. We conclude with a discussion of testable implications. We refer to the psychology literature and argue that production metrics are most likely to emerge when production is characterized by a high degree of uncertainty, such as in sales. Our model's main prediction is that in these types of environments, we would expect to have rapid production and low tenure in order to lower acclimation. In contrast, environments in which costs are more uncertain are more likely to have cost metrics, which favor longer tenure and loose deadlines in order to generate more acclimating reference points. The Precautionary Principle in Product Markets There any many differences between the U.S. and European regulation, but one notable difference concerns assessments of risk. U.S. and European regulation are concerned about different sources of risk and these sources of risk do not always overlap. As noted by Vogel (2003), U.S. regulation gives more consideration to risk concerning environmental harms, carcinogens in food, and endangered species, whereas European regulation emphasizes risks inherent in biotechnology and carbon emissions. In fact, to justify the regulation of biotechnology, Europeans give explicit emphasis to the Precautionary Principle: faced with an irreversible choice, it is better to presume significant harm. However, when it comes to carcinogens in food, Europeans are relatively more willing to bear the risks. In this paper, we use an agency setting to determine how regulators should manage the risks inherent in new products while not placing an undue burden on potential innovators. Faced with a product quality, they can adhere to the Precautionary Principle and presume harm. Alternatively, they can adhere to the Presumption of Innocence and presume the product is harmless. This paper analyzes which is better. There are two assumptions that separate our analysis from the literature. First, we consider a static framework in which no new information arises. Second, we assume that the equilibrium risk is endogenous. Entrepreneurs' can mitigate harm if given the appropriate incentives and their choices to mitigate harm will be influenced by the regulatory framework chosen by the regulators. We present three main findings. Under the extreme assumptions of risk neutral entrepreneurs, an absence of limited liability constraints, and low levels of potential harm, we show that either the Precautionary Principle or a Presumption of Innocence can achieve the first best outcome when faced with a product of uncertain quality. However, under less extreme assumptions, we identify two factors that favor an approach more consistent with the Precautionary Principle. First, if the dominant concern of the regulators is the limited liability constraint, then relying on the Precautionary Principle will best extract rent. Second, under larger levels of harm, the introduction of agency costs (either due to risk aversion or limited liability) will interact with dynamic complementarities. As the cost to incentivize risk mitigation increases, the equilibrium likelihood of severe harm will rise, and the principle will be more likely to prevent the product from coming to the market. Preventing the product from entering the market reduces the incentives to mitigate harm further. In our model, this dynamic complementarity can only exist when the potential harm is large enough that the product's net benefit to society may be negative.