Risk ambiguity: gain, losses by Jaideep Roy and Sujoy Chakravarty (Working Paper)

By: Contributor(s): Material type: TextTextPublication details: Ahmedabad Indian Institute of Management 2006 Description: 30 pSubject(s): DDC classification:
  • WP 2006-02-06 (1932)
Summary: On an aggregate level, authors found that (i) in the domain of risk, subjects are risk averse over both gain and loss lotteries with the degree of risk aversion being lower for losses than gains, (ii) subjects are ambiguity averse over prospects that involve loss and (iii) attitudes toward risk and ambiguity are positively correlated in the domain of gains and are independent of each other in the domain of losses. These behavioral observations are statically significant using both parametric as well as non-parametric tests. Further analysis shows that at an individual level. (a) in the domain of risk, there is a high incidence of a reflection effect across gains and losses through the subjects' behavior is bimodal, that is , many are risk averse in gain and risk seeking in looses while many others are risk seeking in gain and risk averse in losses, while (b) in the domain of ambiguity aversion in gains and ambiguity seeking in losses.
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Working Paper Vikram Sarabhai Library WP 2006-02-06 (1932) (Browse shelf(Opens below)) Available WP001932

On an aggregate level, authors found that (i) in the domain of risk, subjects are risk averse over both gain and loss lotteries with the degree of risk aversion being lower for losses than gains, (ii) subjects are ambiguity averse over prospects that involve loss and (iii) attitudes toward risk and ambiguity are positively correlated in the domain of gains and are independent of each other in the domain of losses. These behavioral observations are statically significant using both parametric as well as non-parametric tests. Further analysis shows that at an individual level. (a) in the domain of risk, there is a high incidence of a reflection effect across gains and losses through the subjects' behavior is bimodal, that is , many are risk averse in gain and risk seeking in looses while many others are risk seeking in gain and risk averse in losses, while (b) in the domain of ambiguity aversion in gains and ambiguity seeking in losses.

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