Journal article
Risk preferences of Australian academics: Where retirement funds are invested tells the story
Theory and Decision, Vol.80(3), pp.411-426
2016
Abstract
Risk preferences of Australian academics are elicited by analyzing the aggregate distribution of their retirement funds (superannuation) across available investment options. Not more than 10 % of retirement funds are invested as if their owners maximize expected utility under the assumption of constant relative risk aversion with an empirically plausible level of risk aversion. An implausibly high level of risk aversion is required to rationalize any investment into bonds when stocks are available. Not more than 36.54 % of all investments can be rationalized by a model of loss averse preferences. Moreover, the levels of loss aversion typically reported in the experimental studies imply overinvestment in bonds, which is not observed in the data. Up to 67.18 % of all investments can be rationalized by rank-dependent utility or Yaari’s (Econometrica 55:95–115 1987) dual model with empirically plausible parameters. A median Australian academic behaves as if maximizing rank-dependent utility with parameter γ∈[0.76,0.79] in a Tversky and Kahneman (J Risk Uncertain 5:297–323 1992) probability weighting function.
Details
- Title
- Risk preferences of Australian academics: Where retirement funds are invested tells the story
- Authors/Creators
- P. Blavatskyy (Author/Creator)
- Publication Details
- Theory and Decision, Vol.80(3), pp.411-426
- Publisher
- Springer
- Identifiers
- 991005540650507891
- Copyright
- © 2015, Springer Science+Business Media New York.
- Murdoch Affiliation
- School of Management and Governance
- Language
- English
- Resource Type
- Journal article
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- Citation topics
- 6 Social Sciences
- 6.122 Economic Theory
- 6.122.1287 Risk Preferences
- Web Of Science research areas
- Economics
- Social Sciences, Mathematical Methods
- ESI research areas
- Economics & Business