A Simplified Measure of Investor Risk Aversion

This article introduces a simplified measure of investor risk aversion. The singleitem question combines elements from revealed preference and propensity measurement techniques in a way that matches traditional constant relative risk-aversion estimation procedures. Based on survey data from 500 investors living in the United States, scores from the proposed measure were found to correlate with other measures of risk aversion, as well as with indicators of risk-taking. A validity test showed that answers to the proposed measure were statistically associated with equity and cash ownership holdings in respondent portfolios. The simplicity and intuitive nature of the proposed measure and the alignment of question response categories to estimates of constant relative risk aversion make this a potentially valuable addition to the toolkit of researchers, financial educators, investors and those who provide advice to investors. JEL: C83, D10, D11, D14, D19, D81

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ON THE SHAPE OF RISK AVERSION AND ASSET ALLOCATION

International Journal of Theoretical and Applied Finance ◽

10.1142/s021902491450054x ◽

2014 ◽

Vol 17 (08) ◽

pp. 1450054

Author(s):

PIERRE SIX

Keyword(s):

Relative Risk ◽

Numerical Analysis ◽

Risk Aversion ◽

Asset Allocation ◽

Empirical Studies ◽

Relevant Literature ◽

Relative Risk Aversion ◽

Measures Of Risk ◽

Constant Relative Risk Aversion

This paper demonstrates the simple incorporation of any shape of risk aversion into an asset allocation framework. Indeed, the relevant literature about risk aversion shows mixed evidence regarding the shape of this important but subjective variable. Our setting builds on, and can be compared with, the well-known constant relative risk aversion (CRRA) framework and mostly preserves the tractability of the affine-CRRA framework. Our numerical analysis exhibits some link between measures of risk aversions and empirical studies of asset allocation.

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Mean-variance versus utility maximization revisited: The case of constant relative risk aversion

International Review of Financial Analysis ◽

10.1016/j.irfa.2021.101932 ◽

2021 ◽

pp. 101932

Author(s):

Konstantinos Kassimatis

Keyword(s):

Relative Risk ◽

Risk Aversion ◽

Utility Maximization ◽

Relative Risk Aversion ◽

Constant Relative Risk Aversion ◽

Mean Variance

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Partnerships of Bidders with Constant Relative Risk Aversions

Mathematical Problems in Engineering ◽

10.1155/2020/3925835 ◽

2020 ◽

Vol 2020 ◽

pp. 1-7

Author(s):

Pingping Zhao ◽

Kaili Xiang ◽

Peimin Chen

Keyword(s):

Relative Risk ◽

Risk Aversion ◽

Relative Risk Aversion ◽

Unique Equilibrium ◽

Risk Neutral ◽

Bid Price ◽

Risk Aversion Coefficient ◽

Constant Relative Risk Aversion ◽

The Difference

In this paper, we study a dynamic auction for allocating a single indivisible project while different participants have different bid values for the project. When the price rises continuously, the bidders can retreat the auction and obtain the compensation by the difference between the price at retreating time and the previous bid price. The final successful bidder achieves the project and pays compensations to others. We show that the auction of bidders with constant relative risk aversion (CRRA) has a unique equilibrium. While the relative risk aversion coefficient approaches to zero, the equilibrium with CRRA bidders would approach to the equilibrium with risk-neutral bidders.

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