Risk Aversion Relates to Cognitive Ability: Preferences Or Noise?

Ola Andersson, Håkan J. Holm, Jean-Robert Tyran, Erik Wengström

Research output: Contribution to journalArticleScientificpeer-review

49 Citations (Scopus)

Abstract

Recent experimental studies suggest that risk aversion is negatively related to cognitive ability. In this paper we report evidence that this relation may 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. Our results suggest that cognitive ability is related to random decision making rather than to risk preferences. (JEL: C81, C91, D12, D81).

Original languageEnglish
Peer-reviewed scientific journalJournal of the European Economic Association
Volume14
Issue number5
Pages (from-to)1129-1154
Number of pages26
ISSN1542-4766
DOIs
Publication statusPublished - 01.10.2016
MoE publication typeA1 Journal article - refereed

Keywords

  • 511 Economics

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