I propose a consumption-based asset pricing model in which the decision maker prices contingent cash flows realized at different future horizons and exposed to multiple shocks. The decision maker ignores the objective probability generating the data, and she evaluates a set of models that is...

We find that macroeconomic uncertainty plays a significant role in U.S. monetary policy. First, we construct a measure of uncertainty as felt by policymakers at the time of making their rate-setting decisions. This measure is derived from a real-time, Bayesian estimation of a small monetary VAR...

It has long been recognized that there is considerable heterogeneity in individual risk taking behavior but little is known about the distribution of risk taking types. We present a parsimonious characterization of risk taking behavior by estimating a finite mixture regression model for three...

International climate policy has assigned the leading role in emissions abatement to the industrialized countries while developing countries remain uncommitted to binding emission reduction targets. However, cooperation between the industrialized and the developing world through joint...

Standard human capital theory suggests that individuals select into education in order to maximize their utility. If agents are risk averse, they select the educational level that minimizes future uncertainty. The possibility of self-selection complicates the identi fication of the causal...

This study analyzes the relationship of individual risk attitudes and occupational sorting with respect to occupational earnings risk. By using the German Mikrozensus, a precise measure for earnings risk is computed as the occupation-wide standard deviation of wages. Following the procedure...

We use data on insurance deductible choices to estimate a structural model of risky choice that incorporates "standard" risk aversion (diminishing marginal utility for wealth) and probability distortions. We find that probability distortions -- characterized by substantial overweighting of small...