Risk Aversion Relates to Cognitive Ability: Preferences or Noise?

Reprint No. 2016:41

Author(s): Ola Andersson, Håkan J. Holm, Jean-Robert Tyran and Erik WengströmYear: 2016 Title: Journal of the European Economic Association Volume (No.): 14 (5) Pages: 1129–1154
Online article (restrictions may apply)
Preliminary version

Recent experimental studies suggest that risk aversion is negatively related to cognitive ability. In this paper we report evidence that this relation may be spurious. We recruit a large subject pool drawn from the general Danish population for our experiment. By presenting subjects with choice tasks that vary the bias induced by random choices, we are able to generate both negative and positive correlations between risk aversion and cognitive ability. Our results suggest that cognitive ability is related to random decision making rather than to risk preferences.

Andersson, Ola, Håkan J. Holm, Jean-Robert Tyran and Erik Wengström (2016), "Risk Aversion Relates to Cognitive Ability: Preferences or Noise?". Journal of the European Economic Association 14(5), 1129–1154.

Ola Andersson


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