University of Oulu

Matti Koivuranta, Marko Korhonen, Changes in risk preferences: Evidence from Swedish harness horse racing data, Journal of Economic Behavior & Organization, Volume 187, 2021, Pages 16-32, ISSN 0167-2681,

Changes in risk preferences : evidence from Swedish harness horse racing data

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Author: Koivuranta, Matti1; Korhonen, Marko1
Organizations: 1Department of Economics, University of Oulu, P.O. Box 4600, 90014, Finland
Format: article
Version: published version
Access: open
Online Access: PDF Full Text (PDF, 1.7 MB)
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Language: English
Published: Elsevier, 2021
Publish Date: 2021-09-02


We measure the time variation of risk preferences in real market data. We utilize data on Swedish tote-betting on horse races for the period 1995 to 2015 and show that risk preferences among horse-race bettors change with economic conditions. More specifically, we extract a measure of risk-aversion based on the favorite-longshot bias (FLB) and provide evidence that the computed measure follows the consumer-confidence index. In addition, we show by an application that the FLB-based risk-preference measure sharpens the predictions of a simple forecasting model for Swedish industrial production. Furthermore, we show that risk-aversion consistently increases following shocking news on disastrous events, including non-economic events such as natural disasters and terrorist attacks. We argue that emotions, such as fear, are the likely explanation for this variation.

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Series: Journal of economic behavior & organization
ISSN: 0167-2681
ISSN-E: 1879-1751
ISSN-L: 0167-2681
Volume: 187
Pages: 16 - 32
DOI: 10.1016/j.jebo.2021.04.034
Type of Publication: A1 Journal article – refereed
Field of Science: 511 Economics
512 Business and management
Copyright information: © 2021 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY license (