IDEAS home Printed from https://ideas.repec.org/a/inm/ormnsc/v70y2024i6p3493-3509.html
   My bibliography  Save this article

Intertemporal Correlation Aversion—A Model-Free Measurement

Author

Listed:
  • Kirsten I. M. Rohde

    (Erasmus School of Economics, Erasmus University Rotterdam, 3000 DR Rotterdam, Netherlands)

  • Xiao Yu

    (School of Business and Economics, Vrije Universiteit Amsterdam, 1081 HV Amsterdam, Netherlands)

Abstract

Decisions with risky consequences at multiple points in time are driven not only by risk attitudes and time preferences but also by attitudes toward intertemporal correlation (i.e., the correlation between outcomes at different points in time). This paper proposes a model-free method to measure degrees of intertemporal correlation aversion. We disentangle attitudes toward positive and negative intertemporal correlation, which can differ if expected intertemporal utility is violated. In an experiment, subjects on average exhibited correlation aversion both for lotteries with positive correlation and for lotteries with negative correlation. That is, they disliked positive correlations and liked negative correlations. At the individual level, we found heterogeneity and remarkably, many subjects being insensitive to intertemporal correlations. Moreover, for most subjects, expected intertemporal utility was violated because attitudes toward positive and negative correlation differed.

Suggested Citation

  • Kirsten I. M. Rohde & Xiao Yu, 2024. "Intertemporal Correlation Aversion—A Model-Free Measurement," Management Science, INFORMS, vol. 70(6), pages 3493-3509, June.
    • Handle: RePEc:inm:ormnsc:v:70:y:2024:i:6:p:3493-3509
    DOI: 10.1287/mnsc.2023.4863
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mnsc.2023.4863
    Download Restriction: no
    File URL: https://libkey.io/10.1287/mnsc.2023.4863?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:70:y:2024:i:6:p:3493-3509. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.