Marginal risk aversion and preferences in a betting market
Authors: Hamid, Shahid S.; Prakash, Arun J.; Smyser, Michael W.
Source: Applied Economics, Volume 28, Number 3, 1 March 1996 , pp. 371-376(6)
Abstract:An individual's behavioural attitudes toward variance and non-symmetry in the payoff distributions of pari-mutuel gambles are empirically examined using the von Neumann - Morgenstern expected utility of wealth paradigm. Preferences over payoff distributions for a representative bettor are estimated from observed payoffs at a greyhound racetrack. The results indicate that the representative bettor exhibits increasing absolute risk aversion and, given that the representative bettor is locally non-satiated with regard to wealth, exhibits preference for variance and aversion to positive skewness in the payoff distributions of the gambles examined.
Document Type: Research Article
Publication date: March 1, 1996