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How Close to an Auction is the Labor Market? Employee Risk Aversion, Income Uncertainty, and Optimal Labor Contracts
Brown, James N. - 2021
Section I of this paper develops a model of income insurance in the labor market. The model differs from those of previous analyses in its focus on quantitative implications regarding the degree to which wages diverge from marginal value products, both in time-series and in cross-section data....
Persistent link: https://www.econbiz.de/10013245546
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Precautionary Saving and Consumption Smoothing Across Time and Possibilities
Kimball, Miles S.; Weil, Philippe - 2021
This paper examines how aversion to risk and aversion to intertemporal substitution determine the strength of the … large risks, we show that decreasing absolute risk aversion guarantees that the precautionary saving motive is stronger than … risk aversion, regardless of the elasticity of intertemporal substitution. Holding risk preferences fixed, the extent to …
Persistent link: https://www.econbiz.de/10013228024
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Risk, Uncertainty and Monetary Policy
Bekaert, Geert - 2010
stance. When decomposing the VIX into two components, a proxy for risk aversion and expected stock market volatility … ("uncertainty"), we find that a lax monetary policy decreases both risk aversion and uncertainty, with the former effect being …
Persistent link: https://www.econbiz.de/10013137030
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Measuring How Risk Tradeoffs Adjust with Income
Evans, Mary F. - 2010
influence both the coefficient of relative risk aversion and the IEVSL. The presence of a consumption commitment, such as a home …
Persistent link: https://www.econbiz.de/10013150841
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Uncertainty Outside and Inside Economic Models
Hansen, Lars Peter - 2014
We must infer what the future situation would be without our interference, and what changes will be wrought by our actions. Fortunately, or unfortunately, none of these processes is infallible, or indeed ever accurate and complete. Knight (1921)
Persistent link: https://www.econbiz.de/10013048614
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Long-Run Risk is the Worst-Case Scenario
Bidder, Rhys - 2016
long-run risks. With risk aversion of 4.7, the model matches major facts about asset prices, consumption, and dividends …
Persistent link: https://www.econbiz.de/10012986692
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Implications of Labor Market Frictions for Risk Aversion and Risk Premia
Swanson, Eric T. - 2019
household's attitudes toward risk, as shown in Swanson (2012). In this paper, I analyze how frictional labor markets affect that … analysis. Household risk aversion (as measured by willingness to pay to avoid a wealth shock) is higher: 1) in countries with … in Europe are large enough to play a substantial contributing role to risk aversion in those countries. Nevertheless …
Persistent link: https://www.econbiz.de/10012871945
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Optimal Currency Diversification for a Class of Risk Averse International Investors
Braga de Macedo, Jorge - 2010
an international investor with constant expenditure shares [alpha, sub j] and constant relative risk aversion [1-gamma … inflation and risk aversion. It is shown that the minimum variance portfolio is independent of returns, but depends on … expenditure patterns. While the speculative portfolio depends on risk aversion and real return differentials. When the effect of …
Persistent link: https://www.econbiz.de/10012763133
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Prospect Theory and Asset Prices
Barberis, Nicholas - 2010
, and predictability of stock returns. The key to our results is that the agent's risk-aversion changes over time as a …
Persistent link: https://www.econbiz.de/10012763762
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Measuring Investment Distortions When Risk-Averse Managers Decide Whether to Undertake Risky Projects
Parrino, Robert - 2002
This paper examines distortions in corporate investment decisions when a new project changes firm risk. It presents a … dynamic model in which a self-interested, risk-averse manager makes investment decisions at a levered firm. The model … factors in this decision are the expected changes in the values of future tax shields and bankruptcy costs when firm risk …
Persistent link: https://www.econbiz.de/10012787353