Risk Aversion Relates to Cognitive Ability: Fact or Fiction?

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IFN Working Paper ; No. 964

Classification and Topics

• Classification: Wirtschaft ; Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access ; Design of Experiments: Laboratory, Individual ; Consumer Economics: Empirical Analysis ; Criteria for Decision-Making under Risk and Uncertainty
• Subject: Risk preference ; Cognitive ability ; Experiment ; Noise

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Andersson, Ola ; Tyran, Jean-Robert ; Wengström, Erik ; Holm, Håkan J.
• Event: Veröffentlichung
• (who): Research Institute of Industrial Economics (IFN)
• (where): Stockholm
• (when): 2013

Further information

• Handle: http://hdl.handle.net/10419/81522
• Last update: 10.03.2025, 11:44 AM CET