Time Varying Risk Aversion: An Application to Energy Hedging

Cotter, John; Hanly, Jim

doi:10.2139/ssrn.1517112

Cited by 7 publications

(5 citation statements)

References 36 publications

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“…However, in traditional GARCH-M model, a hypothesis is actually implied: in a certain period, the risk compensation the investor demands for each unit of risk is fixed. However, [39][40][41] find that people's risk attitude is changing with time. The greater the extent of risk aversion is, the more the compensation return the investor demands for each unit of risk.…”

Section: The Thoughts Of Empirical Analysismentioning

confidence: 99%

The Effects of Prior Outcomes on Risky Choice: Evidence from the Stock Market

Wen

Gong

Chao

et al. 2014

Mathematical Problems in Engineering

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How do prior outcomes affect the risk choice? Research on this can help people to understand investors’ dynamic decisions in financial market. This paper puts forward a new value function. By analyzing the new value function, we find that the prior gains and losses have an impact on the form of value function and the current investors’ risk attitude. Then the paper takes the behavior of the whole stock market as the research object, adopts aggregative index number of 14 representative stocks around the world as samples, and establishes a TVRA-GARCH-M model to investigate the influences of prior gains and losses on the current risk attitude. The empirical study indicates that, at the whole market level, prior gains increase people’s current willingness to take risk assert; that is to say, the house money effect exists in the market, while people are more risk aversion following prior losses.

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Section: The Thoughts Of Empirical Analysismentioning

confidence: 99%

The Effects of Prior Outcomes on Risky Choice: Evidence from the Stock Market

Wen

Gong

Chao

et al. 2014

Mathematical Problems in Engineering

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“…Risk preference tends to focus on behaviors involving higher variance in audits, regardless whether they are beneficial or detrimental (Cotter & Hanly, 2010). Auditors with high risk preferences have a high level of confidence and they are bolder in taking high risks.…”

Section: H1mentioning

confidence: 99%

Fraud Risk Assessment: Experimental Study on the Alternative Fraud Model and Auditor Risk Preferences

Artati

Noviyanti²

2020

JRAK

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Fraud risk assessment is an important part of the audit process and one of the toughest challenges faced by auditors. In considering fraud risk assessment, fraud models and risk preferences can influence auditor’s decisions. This study uses a 2x2 between-subject experimental design with a total of 110 auditors of public accountant firms in Central Java as participants and produces 60 data ready for processing. Participants were formed into 4 groups with different treatments which the treatments consist of Diamond Fraud model with high and low risk preferences and Pentagon Fraud model with high and low risk preferences. The results show that the use of Pentagon Fraud model will result a more conservative fraud risk assessment. When auditors dare to take high risk action, the resulting fraud risk assessment will be low. In addition, the fraud model and risk preference variables show a significant influence on the performing of fraud risk assessment. There is an interaction between fraud models and auditors’ risk preferences in the performance of fraud risk assessment.

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“…Previous studies found that investors' risk aversion varies at different time periods ( [33,34], etc.). The higher risk aversion means higher return compensation investors demand for unit risk they take, which implies that the risk premium coefficient should vary with time and other factors.…”

Section: Time Variation Of Risk Premium Coefficientmentioning

confidence: 99%

Time-Varying Risk Attitude and Conditional Skewness

Liu

Zhang

Wen

2014

Abstract and Applied Analysis

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Much literature finds that the skewness in the return distribution is negatively correlated with the risk premium coefficient, and speculation is the reason for the skewness in the return distribution. As further research, this paper, first taking up the time-varying property of the risk premium coefficient, proposes a GARCH-M model with a time-varying coefficient of the risk premium for an empirical study of the correlation between the conditional skewness in the return distribution and the time-varying risk attitude. The empirical study indicates that the coefficient of the risk premium varies with the time, and even in a mature market the conditional skewness in the return distribution is negatively correlated with the time-varying coefficient of the risk premium.

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Time Varying Risk Aversion: An Application to Energy Hedging

Cited by 7 publications

References 36 publications

The Effects of Prior Outcomes on Risky Choice: Evidence from the Stock Market

The Effects of Prior Outcomes on Risky Choice: Evidence from the Stock Market

Fraud Risk Assessment: Experimental Study on the Alternative Fraud Model and Auditor Risk Preferences

Time-Varying Risk Attitude and Conditional Skewness

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