Do Individuals Have Preferences Used in Macro-Finance Models? An Experimental Investigation

• 成果类型: Article
• 署名作者: Brown, Alexander L.; Kim, Hwagyun
• 署名单位: Texas A&M University System; Texas A&M University College Station; Texas A&M University System; Texas A&M University College Station; Mays Business School
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2013.1794
• 发表日期: 2014
• 页码: 939-958
• 关键词: finance; portfolio; utility-preference; microeconomics: intertemporal choice; Experimental economics

摘要

Recent financial studies often assume that agents have Epstein-Zin preferences-preferences that require agents to care about when uncertainty is resolved. Under this recursive-preference framework, the preference for uncertainty resolution is entirely determined by an agent's preferences for risk and intertemporal substitution. To test the implications of this model, this paper presents an experiment designed to elicit subject preferences on risk, time, intertemporal substitution, and uncertainty resolution. Results reveal that most subjects prefer early resolution of uncertainty and have relative risk aversion greater than the reciprocal of the elasticity of intertemporal substitution, consistent with the predictions by recursive preferences. Subjects are classified in a finite mixture model by their risk, time, and intertemporal-substitution parameters. Regression results show that types predicted by the Epstein-Zin model to prefer early resolution choose early resolution with 20%-50% higher probability.