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Measuring Risk Aversion
Foundations and Trends® in
Microeconomics
Volume 2 Issue 2
DOI: 10.1561/0700000006
Measuring Risk Aversion
Donald J.Meyer
Western Michigan University, Department of Economics, Kalamazoo, MI 49008, USA, donald.meyer@wmich.edu
Jack Meyer
Michigan State University, Department of Economics, East Lansing, MI 48824, USA, jmeyer@msu.edu
Abstract
The purpose of the survey is to summarize, discuss, and interpret published research concerning the risk aversion of decision
makers who maximize expected utility. In doing this, two points are emphasized. First, any measure of risk aversion is specific
to the particular outcome variable over which the measure is defined or estimated, and second when outcome variables are related,
then their risk aversion measures are also related. These two points are used to show that a substantial portion of the reported
variation in magnitudes and slopes of risk aversion measures from the research of the past forty years results from differences
in the outcome variables, and when these differences are adjusted for, those findings are a quite consistent body of evidence.
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