RISK AVERSION RELATES TO COGNITIVE ABILITY: PREFERENCES OR NOISE?

Risk Aversion Relates to Cognitive Ability: Fact or Fiction?

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 posit...

Are Risk Aversion and Impatience Related to Cognitive Ability?

Are Risk Aversion and Impatience Related to Cognitive Ability? Is the way that people make risky choices, or tradeoffs over time, related to cognitive ability? This paper investigates whether there is a link between cognitive ability, risk aversion, and impatience, using a representative sample of the population and incentive compatible measures. We conduct choice experiments measuring risk ave...

Comparative Risk Aversion for State-Dependent Preferences

Risk Aversion or Myopia?

We study how decision makers choose when faced with multiple plays of a gamble or investment. When evaluating multiple plays of a simple mixed gamble, a chance to win x or lose y, subjects show a sensitivity to the amount to lose on a single trial, holding the distribution of returns for the portfolio constant; that is, they display “myopic loss aversion.” Many subjects who decline multiple pla...

Cognitive Load Increases Risk Aversion

We investigate how stable individuals’ risk attitudes are with respect to changes in cognitive load. In a laboratory experiment using pairwise lottery choice and a within-subject design, we show that putting subjects under load via a concurrent working-memory task significantly increases their risk aversion. Subjects made significantly faster choices under load. Regardless of load, they respond...