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Anomalies: Risk aversion

In: HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I

Author

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  • Matthew Rabin
  • Richard H. Thaler
Abstract
Economics can be distinguished from other social sciences by the belief that most (all?) behavior can be explained by assuming that rational agents with stable, well-defined preferences interact in markets that (eventually) clear. An empirical result qualifies as an anomaly if it is difficult to “rationalize” or if implausible assumptions are necessary to explain it within the paradigm. Suggestions for future topics should be sent to Richard Thaler, c/o Journal of Economic Perspectives, Graduate School of Business, University of Chicago, Chicago, IL 60637, or 〈thaler@gsb.uchicago.edu〉.

Suggested Citation

  • Matthew Rabin & Richard H. Thaler, 2013. "Anomalies: Risk aversion," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 27, pages 467-480, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789814417358_0027
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    References listed on IDEAS

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    1. Matthew Rabin., 2000. "Diminishing Marginal Utility of Wealth Cannot Explain Risk Aversion," Economics Working Papers E00-287, University of California at Berkeley.
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    5. Shlomo Benartzi & Richard H. Thaler, 1995. "Myopic Loss Aversion and the Equity Premium Puzzle," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(1), pages 73-92.
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    7. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
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    More about this item

    Keywords

    Financial Decision Making; Asset Pricing; Prospect Theory; Utility Theory; Risk Aversion; Static Portfolio Theory; Stochastic Dominance; Dynamic Modeling; Dynamic Portfolio Theory; Tactical Asset Allocation; Kelly Strategy; Capital Growth;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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