Reference dependent preferences have been applied in both risky and certainty settings, although little attention has been directed at the relationship between the reference points as well as the loss aversion functions for these models. This paper addresses this relationship for the special...

This paper empirically examines the behavioral precautionary saving hypothesis by Koszegi and Rabin (2009) stating that uncertainty about future income triggers saving because of loss aversion. We extend their theoretical analysis to also consider the internal margin, i.e., the strength, of loss...

Standard international economic models with life cycle/permanent income consumption behavior predict that international portfolio diversification leads to high bilateral consumption correlations. Thus international consumption correlations have been empirically estimated as a test of...

This paper empirically examines the behavioral precautionary saving hypothesis that uncertainty about future income triggers an increase in saving because of loss aversion. Guided by the theoretical model of Koszegi and Rabin (2009), we first extend their theoretical analysis to also consider...

Using detailed micro-data, this paper documents that households with lower income risk (and higher income levels) exhibit a higher Marginal Propensity to Consume (MPC) in response to transitory income shocks, all else being equal. This finding is particularly significant among unconstrained...