On the coefficient of variation as a criterion for decision under risk
The coefficient of variation (CV) has been advocated as a measure of risk sensitivity in meta-analyses of data for risky choices by animals and humans. We examine properties of the CV measure. We demonstrate that the CV has unsatisfactory normative properties because it is inconsistent with preferen...
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| Published in | Journal of mathematical psychology Vol. 54; no. 4; pp. 387 - 394 |
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| Main Authors | , |
| Format | Journal Article |
| Language | English |
| Published |
Elsevier Inc
01.08.2010
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| Subjects | |
| Online Access | Get full text |
| ISSN | 0022-2496 1096-0880 |
| DOI | 10.1016/j.jmp.2010.01.002 |
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| Abstract | The coefficient of variation (CV) has been advocated as a measure of risk sensitivity in meta-analyses of data for risky choices by animals and humans. We examine properties of the CV measure. We demonstrate that the CV has unsatisfactory normative properties because it is inconsistent with preference for more than for less of the reward medium. Whether or not the CV succeeds as a descriptive criterion depends on its consistency or inconsistency with data. We report two experiments designed to test the distinctive properties of the CV. The experiments involve human subjects motivated by salient monetary payoffs. Data from the experiments do not support the CV as a descriptive criterion for decision under risk. We also use data from an experiment designed to test for the incidence of patterns of small-stakes risk aversion used in concavity calibration. These data also do not support the CV as a good descriptive criterion. |
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| AbstractList | The coefficient of variation (CV) has been advocated as a measure of risk sensitivity in meta-analyses of data for risky choices by animals and humans. We examine properties of the CV measure. We demonstrate that the CV has unsatisfactory normative properties because it is inconsistent with preference for more than for less of the reward medium. Whether or not the CV succeeds as a descriptive criterion depends on its consistency or inconsistency with data. We report two experiments designed to test the distinctive properties of the CV. The experiments involve human subjects motivated by salient monetary payoffs. Data from the experiments do not support the CV as a descriptive criterion for decision under risk. We also use data from an experiment designed to test for the incidence of patterns of small-stakes risk aversion used in concavity calibration. These data also do not support the CV as a good descriptive criterion. |
| Author | Sadiraj, Vjollca Cox, James C. |
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| Cites_doi | 10.2307/2555063 10.1016/0022-0531(70)90038-4 10.1007/BF00122574 10.2307/1911158 10.1034/j.1600-0706.2000.880323.x 10.1016/j.geb.2005.08.001 10.1037/0033-295X.111.2.430 10.1111/1468-0262.00158 |
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| References | Cox, Sadiraj (br000005) 2006; 56 Harrison, Rutstrom (br000020) 2008; Vol. 12 Quiggin (br000035) 1993 Rothschild, Stiglitz (br000045) 1970; 2 Yaari (br000065) 1987; 55 Hadar, Russell (br000015) 1969; 59 Knight (br000025) 1921 Loomes, Starmer, Sudgen (br000030) 1992; 59 Tversky, Kahneman (br000055) 1992; 5 Georgia State University. Rabin (br000040) 2000; 68 Shafir (br000050) 2000; 88 Weber, Shafir, Blais (br000060) 2004; 111 Cox, J. C., Sadiraj, V., Vogt, B., & Dasgupta, U. (2009). Is there a plausible theory for decision under risk? Harrison (10.1016/j.jmp.2010.01.002_br000020) 2008; Vol. 12 Knight (10.1016/j.jmp.2010.01.002_br000025) 1921 Rabin (10.1016/j.jmp.2010.01.002_br000040) 2000; 68 Weber (10.1016/j.jmp.2010.01.002_br000060) 2004; 111 Shafir (10.1016/j.jmp.2010.01.002_br000050) 2000; 88 Loomes (10.1016/j.jmp.2010.01.002_br000030) 1992; 59 Quiggin (10.1016/j.jmp.2010.01.002_br000035) 1993 Cox (10.1016/j.jmp.2010.01.002_br000005) 2006; 56 Tversky (10.1016/j.jmp.2010.01.002_br000055) 1992; 5 10.1016/j.jmp.2010.01.002_br000010 Rothschild (10.1016/j.jmp.2010.01.002_br000045) 1970; 2 Hadar (10.1016/j.jmp.2010.01.002_br000015) 1969; 59 Yaari (10.1016/j.jmp.2010.01.002_br000065) 1987; 55 |
| References_xml | – year: 1993 ident: br000035 article-title: Generalized expected utility theory: The rank-dependent model – volume: 88 start-page: 663 year: 2000 end-page: 669 ident: br000050 article-title: Risk-sensitive foraging: The effect of relative variability publication-title: Oikos – volume: 59 start-page: 17 year: 1992 end-page: 33 ident: br000030 article-title: Are preferences monotonic: Testing some implications of regret theory publication-title: Economica – volume: 111 start-page: 430 year: 2004 end-page: 445 ident: br000060 article-title: Predicting risk sensitivity in humans and lower animals: Risk as variance or coefficient of variation publication-title: Psychological Review – reference: Cox, J. C., Sadiraj, V., Vogt, B., & Dasgupta, U. (2009). Is there a plausible theory for decision under risk? – year: 1921 ident: br000025 article-title: Risk, uncertainty, and profit – volume: 59 start-page: 25 year: 1969 end-page: 34 ident: br000015 article-title: Rules for ordering uncertain prospects publication-title: American Economic Review – volume: 56 start-page: 45 year: 2006 end-page: 60 ident: br000005 article-title: Small- and large-stakes risk aversion: Implications of concavity calibration for decision theory publication-title: Games and Economic Behavior – volume: Vol. 12 year: 2008 ident: br000020 article-title: Risk aversion in the laboratory publication-title: Risk aversion in experiments – volume: 55 start-page: 95 year: 1987 end-page: 115 ident: br000065 article-title: The dual theory of choice under risk publication-title: Econometrica – volume: 5 start-page: 297 year: 1992 end-page: 323 ident: br000055 article-title: Advances in prospect theory: Cumulative representation of uncertainty publication-title: Journal of Risk and Uncertainty – volume: 2 start-page: 225 year: 1970 end-page: 243 ident: br000045 article-title: Increasing risk: I. A definition publication-title: Journal of Economic Theory – reference: . Georgia State University. – volume: 68 start-page: 1281 year: 2000 end-page: 1292 ident: br000040 article-title: Risk aversion and expected utility theory: A calibration theorem publication-title: Econometrica – year: 1921 ident: 10.1016/j.jmp.2010.01.002_br000025 – volume: 59 start-page: 17 year: 1992 ident: 10.1016/j.jmp.2010.01.002_br000030 article-title: Are preferences monotonic: Testing some implications of regret theory publication-title: Economica doi: 10.2307/2555063 – volume: 59 start-page: 25 year: 1969 ident: 10.1016/j.jmp.2010.01.002_br000015 article-title: Rules for ordering uncertain prospects publication-title: American Economic Review – volume: 2 start-page: 225 year: 1970 ident: 10.1016/j.jmp.2010.01.002_br000045 article-title: Increasing risk: I. A definition publication-title: Journal of Economic Theory doi: 10.1016/0022-0531(70)90038-4 – volume: 5 start-page: 297 year: 1992 ident: 10.1016/j.jmp.2010.01.002_br000055 article-title: Advances in prospect theory: Cumulative representation of uncertainty publication-title: Journal of Risk and Uncertainty doi: 10.1007/BF00122574 – volume: Vol. 12 year: 2008 ident: 10.1016/j.jmp.2010.01.002_br000020 article-title: Risk aversion in the laboratory – volume: 55 start-page: 95 year: 1987 ident: 10.1016/j.jmp.2010.01.002_br000065 article-title: The dual theory of choice under risk publication-title: Econometrica doi: 10.2307/1911158 – volume: 88 start-page: 663 year: 2000 ident: 10.1016/j.jmp.2010.01.002_br000050 article-title: Risk-sensitive foraging: The effect of relative variability publication-title: Oikos doi: 10.1034/j.1600-0706.2000.880323.x – ident: 10.1016/j.jmp.2010.01.002_br000010 – year: 1993 ident: 10.1016/j.jmp.2010.01.002_br000035 – volume: 56 start-page: 45 year: 2006 ident: 10.1016/j.jmp.2010.01.002_br000005 article-title: Small- and large-stakes risk aversion: Implications of concavity calibration for decision theory publication-title: Games and Economic Behavior doi: 10.1016/j.geb.2005.08.001 – volume: 111 start-page: 430 year: 2004 ident: 10.1016/j.jmp.2010.01.002_br000060 article-title: Predicting risk sensitivity in humans and lower animals: Risk as variance or coefficient of variation publication-title: Psychological Review doi: 10.1037/0033-295X.111.2.430 – volume: 68 start-page: 1281 year: 2000 ident: 10.1016/j.jmp.2010.01.002_br000040 article-title: Risk aversion and expected utility theory: A calibration theorem publication-title: Econometrica doi: 10.1111/1468-0262.00158 |
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| Title | On the coefficient of variation as a criterion for decision under risk |
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