Impact of Presentation Format and Self-Reported Risk Aversion on Revealed Skewness Preferences

Authors:
Dennis Vrecko;Alexander Klos;Thomas Langer
Affiliations:
Finance Center Münster, DIA Research Group for Retirement Savings, University of Münster, 48143 Münster, Germany;Finance Center Münster, DIA Research Group for Retirement Savings, University of Münster, 48143 Münster, Germany;Finance Center Münster, DIA Research Group for Retirement Savings, University of Münster, 48143 Münster, Germany
Venue:
Decision Analysis
Year:
2009

Citing 4
Cited 6

Perceived risk attitudes: relating risk perception to risky choice

Management Science
A Heuristic for Moment-Matching Scenario Generation

Computational Optimization and Applications
Generating Scenario Trees for Multistage Decision Problems

Management Science
Maximum Likelihood Estimation with Stata

Maximum Likelihood Estimation with Stata

From the Editors...

Decision Analysis
From the Editor...

Decision Analysis
How Riskily Do I Invest? The Role of Risk Attitudes, Risk Perceptions, and Overconfidence

Decision Analysis
Eliciting Patients' Revealed Preferences: An Inverse Markov Decision Process Approach

Decision Analysis
Communicating Analytic Results: A Tutorial for Decision Consultants

Decision Analysis
From the Editors---Brainstorming, Multiplicative Utilities, Partial Information on Probabilities or Outcomes, and Regulatory Focus

Decision Analysis

Quantified Score

Hi-index	0.00

Visualization

Abstract

This paper reports the results of an experiment on the revealed preference for skewness in a comparison of continuous return distributions. We find that revealed preferences are highly sensitive to the way asset risks are communicated. Whereas probability density functions lead to a pronounced preference for left-skewed distributions, the opposite is true for cumulative distribution functions. Systematic misperceptions of the variance cannot explain the sensitivity of preferences to the presentation format. Part of the preference for positive skewness when risks are communicated through probability density functions is due to a systematic misestimation of the expected return. We also find that self-reported risk aversion, a measure of risk attitude commonly used in practice, is a valuable predictor of skewness preferences. Individuals that judge themselves as more risk averse show a stronger preference for right skewness.