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- Title
RELATIVE RISK AVERSION REVISITED.
- Authors
Siegel, Frederick W.; Hoban Jr., James P.
- Abstract
The article presents empirical evidence on relative risk aversion of households by using data from the National Longitudinal Surveys. The study measures nonmarketable assets more comprehensively than earlier studies and concentrates on a representative cross-section of U.S. households of high and low wealth classes rather than restricts itself to high wealth households. Furthermore, it separates age effects from wealth effects upon risk aversion through its restriction to a single age group. The paper argues that the results of previous studies by researchers are ambiguous because of data limitations, sampling biases, a confusion of age and wealth effects, and statistical problems due to the measurement of relative risk aversion (RRA) as the intercept of a regression line. By restricting the data and procedures to conform to those used by the previous researchers, this research reaffirms their results. If wealth is defined narrowly, RRA is seen to increase for less wealthy households probably because their repayment of debt dominates their acquisition of risk assets.
- Subjects
UNITED States; COST of living; RISK; MATHEMATICAL models of economics; RISK aversion; HOUSEHOLDS; WEALTH; AGE factors in social status; REGRESSION analysis
- Publication
Review of Economics & Statistics, 1982, Vol 64, Issue 3, p481
- ISSN
0034-6535
- Publication type
Article
- DOI
10.2307/1925947