Risk aversion relates to cognitive ability: Preferences or noise?

Author(s)
Ola Andersson, Hakan Holm, Jean-Robert Tyran, Erik Wengström
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).

Organisation(s)
Department of Economics, Vienna Center for Experimental Economics
External organisation(s)
Research Institute of Industrial Economics, Lund University, University of Copenhagen
Journal
Journal of the European Economic Association
Volume
14
Pages
1129–1154
No. of pages
26
ISSN
1542-4766
DOI
https://doi.org/10.1111/jeea.12179
Publication date
10-2016
Peer reviewed
Yes
Austrian Fields of Science 2012
502045 Behavioural economics, 502021 Microeconomics
Keywords
ASJC Scopus subject areas
Economics, Econometrics and Finance(all)
Portal url
https://ucris.univie.ac.at/portal/en/publications/risk-aversion-relates-to-cognitive-ability-preferences-or-noise(ccafb5d4-c7bb-49e2-8d11-ac58d322356f).html