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Manipulating Reliance on Intuition Reduces Risk and Ambiguity Aversion.

Butler, Jeff; Guiso, Luigi; Jappelli, Tullio - C.E.P.R. Discussion Papers - 2013

Prior research suggests that those who rely on intuition rather than effortful reasoning when making decisions are less averse to risk and ambiguity. The evidence is largely correlational, however, leaving open the question of the direction of causality. In this paper, we present experimental...

Persistent link: https://www.econbiz.de/10011083555

Uncertainty Aversion and Systemic Risk

Dicks, David L.; Fulghieri, Paolo - C.E.P.R. Discussion Papers - 2015

We propose a new theory of systemic risk based on Knightian uncertainty (or "ambiguity"). We show that, due to uncertainty aversion, beliefs on future asset returns are endogenous, and bad news on one asset class induces investors to be more pessimistic about other asset classes as well. This...

Persistent link: https://www.econbiz.de/10011213303

Ambiguity, Disagreement, and Allocation of Control in Firms

Dicks, David L.; Fulghieri, Paolo - C.E.P.R. Discussion Papers - 2015

We present a novel source of disagreement grounded in decision theory: ambiguity aversion. We show that ambiguity aversion generates endogenous disagreement between a firm's insider and outside shareholders, creating a new rationale for corporate governance systems. In our paper, optimal...

Persistent link: https://www.econbiz.de/10011213312

Scattered Trust - Did the 2007-08 financial crisis change risk perceptions?

Füss, Roland; Gehrig, Thomas; Rindler, Philipp B - C.E.P.R. Discussion Papers - 2011

The paper investigates whether the financial crisis did affect risk perceptions, and, hence, change structural parameters. By decomposing credit spreads of US corporate bonds into the contributions by credit, equity, and liquidity risk factors as well as structural change, the relative...

Persistent link: https://www.econbiz.de/10009399718

Bailout Uncertainty in a Microfounded General Equilibrium Model of the Financial System

Cukierman, Alex; Izhakian, Yehuda - C.E.P.R. Discussion Papers - 2011

This paper develops a micro-founded general equilibrium model of the financial system composed of ultimate borrowers, ultimate lenders and financial intermediaries. The model is used to investigate the impact of uncertainty about the likelihood of governmental bailouts on leverage, interest...

Persistent link: https://www.econbiz.de/10009144737

Risk Sharing and Industrial Specialization: Regional and International Evidence

Sørensen, Bent E; Yosha, Oved - C.E.P.R. Discussion Papers - 1999

We provide empirical evidence that risk sharing enhances specialization in production. To the best of our knowledge, this well-established and important theoretical proposition has not been tested before. Our empirical procedure is summarized as follows. First, we construct a measure of...

Persistent link: https://www.econbiz.de/10005504254

The Empirical Importance of Precautionary Saving

Gourinchas, Pierre-Olivier; Parker, Jonathan A - C.E.P.R. Discussion Papers - 2001

extant research on consumption insurance find that people face substantial risks that they do not fairly pool. In theory, the …

Persistent link: https://www.econbiz.de/10005504693

Insurance companies of the poor

Bold, Tessa; Dercon, Stefan - C.E.P.R. Discussion Papers - 2014

We model the emergence of formal insurance institutions as equilibria under limited contract enforceability where … formal and informal groups without requiring heterogeneity in insurance demand, because coalition-proof equilibria can fail … to exist. It also predicts where formal insurance is likely to flourish: insurance groups that hold savings become more …

Persistent link: https://www.econbiz.de/10011096095

Time Inconsistent Preferences and the Annuitization Decision

Schreiber, Philipp; Weber, Martin - C.E.P.R. Discussion Papers - 2015

When entering retirement most people face the decision whether they would like their defined contribution account balance paid as a lump sum or to annuitize the amount. The fact that people tend to choose the lump sum even if economic reasons suggest not to is called the annuity puzzle. In a...

Persistent link: https://www.econbiz.de/10011165648

Partial Insurance and Investments in Children

Carneiro, Pedro; Ginja, Rita - C.E.P.R. Discussion Papers - 2015

partial insurance of parental investments against permanent income shocks, but the magnitude of the estimated responses is … small. We cannot reject the hypothesis full insurance against temporary shocks. Another interpretation of our findings is … that there is very little insurance available, but the fact that skill is a non-separable function of parental investments …

Persistent link: https://www.econbiz.de/10011266538