Risk aversion relates to cognitive ability: Fact or Fiction

Publikation: Working paperForskning

Recent experimental studies suggest that risk aversion is negatively related to cognitive ability. In this paper we report evidence that this relation might be spurious. We recruit a large subject pool drawn from the general Danish population for our experiment. By presenting subjects with choice tasks that vary the bias induced by random choices, we are able to generate both negative and positive
correlations between risk aversion and cognitive ability. Structural estimation allowing for heterogeneity of noise yields no significant relation between risk aversion and cognitive ability. Our results suggest that cognitive ability is related to random decision making rather than to risk preferences.
Udgivelses stedKbh.
UdgiverØkonomisk institut, Københavns Universitet
Antal sider37
StatusUdgivet - 2013
NavnUniversity of Copenhagen. Institute of Economics. Discussion Papers

Bibliografisk note

JEL codes: C81; C91; D12; D81

ID: 85237386