TY - JOUR
T1 - Money demand and risk
T2 - A classroom experiment
AU - Ewing, Bradley T.
AU - Kruse, Jamie B.
AU - Thompson, Mark A.
N1 - Funding Information:
bradley.ewing@baylor.edu). Jamie B. Kruse is a professor of economics at Texas Tech University, and Mark A. Thompson is an assistant professor of economics at Stephen F. Austin State University. Financial support provided by the Institute for University Research: Research Enhancement Fund, College of Arts and Sciences, Texas Tech University. The authors thank three anonymous referees for their valuable comments.
PY - 2004
Y1 - 2004
N2 - The authors describe a classroom experiment that motivates student understanding of behavior toward risk and its effect on money demand. In this experiment, students are endowed with an income stream that they can allocate between a risk-free fund and a risky fund. Changes in volatility are represented by mean-preserving changes in the variance of the risky fund. When volatility of the risky fund increases, reallocating to the risk-free fund results in an increase in aggregate money demand. By responding to changes in volatility and then observing the aggregate response of their cohort, students gain a better understanding of the concept of money demand, portfolio allocation, and risk.
AB - The authors describe a classroom experiment that motivates student understanding of behavior toward risk and its effect on money demand. In this experiment, students are endowed with an income stream that they can allocate between a risk-free fund and a risky fund. Changes in volatility are represented by mean-preserving changes in the variance of the risky fund. When volatility of the risky fund increases, reallocating to the risk-free fund results in an increase in aggregate money demand. By responding to changes in volatility and then observing the aggregate response of their cohort, students gain a better understanding of the concept of money demand, portfolio allocation, and risk.
KW - Classroom experiments
KW - Money demand
KW - Portfolio allocation
KW - Risk
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U2 - 10.3200/JECE.35.3.243-250
DO - 10.3200/JECE.35.3.243-250
M3 - Article
AN - SCOPUS:3042515197
SN - 0022-0485
VL - 35
SP - 243
EP - 250
JO - Journal of Economic Education
JF - Journal of Economic Education
IS - 3
ER -