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Aspirations, Well-being, Risk-Aversion and Loss-Aversion

Author

Listed:
  • Koedijk, Kees
  • Pownall, Rachel A J
  • Statman, Meir

Abstract

Financial well-being is distinct from income. Some people with high incomes suffer low financial well-being, as their incomes fall short of their aspirations. Such people feel propelled to reach their aspirations by taking risk and willing to bear losses. Conversely, some people with low incomes enjoy high financial well-being, as their incomes exceed their aspirations. We find that people whose aspirations exceed their income are less risk-averse and less loss-averse than people whose incomes exceed their aspirations. We also find that competitive and status-seeking people are less risk-averse than people who are less competitive and status-seeking, and that status-seeking people are less loss-averse than people who are not as status-seeking.

Suggested Citation

  • Koedijk, Kees & Pownall, Rachel A J & Statman, Meir, 2012. "Aspirations, Well-being, Risk-Aversion and Loss-Aversion," CEPR Discussion Papers 8904, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:8904
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Subjective well-being; Risk-taking; Loss-aversion; Prospect theory; Behavioural portfolio theory;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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