Nuremberg Research Seminar in Economics on 17 November 2021 – Room 4.154
You are invited to join the weekly Nuremberg Research Seminar in Economics on 17 November 2021, from 13.15 to 14.45 pm. The seminar will be held in room Number LG 4.154 in compliance with the 2G regulations. Petra Steinorth (University of Hamburg) will be talking about „How does multiplicative background risk affect risk taking? Theoretical predictions and experimental evidence“
More information can be found here:
Preferences exhibit multiplicative risk vulnerability (MRV) if an individual behaves in a more risk-averse way after the introduction of any unfair multiplicative background risk. We examine risk-taking behavior in the standard portfolio problem and provide conditions for MRV under expected utility theory, cumulative prospect theory and rank-dependent utility. We conduct the first incentivized laboratory experiment to test the effects of multiplicative background risk on risk taking. We find that the propensity for MRV choices is heavily dependent on the shape of the background risk in our sample: the presence of a left-skewed multiplicative background risk increases risk taking by approximately 10%. A symmetric background risk does not lead to changes in risk-taking behavior compared to the situation without background risk. We do not find any statistical association between MRV and sociodemographic factors.