<p>Its very hard to give an actual real world example of risk neutral person (firms are just run by people only people can have attitudes to risk) not because they do not exist but because research on micro-level risk neutrality does not publishes name of its participants and all data are anonymized. You also can't say someone is risk neutral just by pointing toward some non-experimental decision they made in real world as in such situation there might be a lot of different effects in play that you cant control for. That being said, there are some studies that try to empirically measure risk attidudes for industries just not really giving particular examples.</p>
<p>For example, <a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/0002-9092.00225" rel="nofollow noreferrer">Pennings &amp; Philip Garcia (2001)</a> examine the risk attitudes in Dutch farming industry using the certainty equivalence technique. The authors report that in their sample <span class="math-container">$6\%$</span> of farmers were shown to be risk neutral, <span class="math-container">$34\%$</span> risk averse and <span class="math-container">$60\%$</span> risk seeking (see their table 3), but of course they will not provide names of those individuals. So based on this we can conclude that <span class="math-container">$6\%$</span> of Dutch farmers out of 373 included in the study were risk neutral.</p>
<p>When it comes to investors, for example <a href="https://academic.oup.com/rof/article-abstract/9/4/437/1604936" rel="nofollow noreferrer">Dorn and Huberman (2005)</a> use survey data on self reported attitudes to risk of German investors. The data show that actually most investors are neither too risk averse neither too risk loving. Unfortunately, this does not necessary imply they are <em>exactly</em> risk neutral as they could be just slightly risk averse or risk loving. It is hard to measure what proportion of people are exactly risk neutral outside some experimental framework, but this would seem to suggest some risk-neutral investors probably exist.</p>
<p>I could not find any example of an industry where empirically risk neutral people would dominate. That being said, absence of evidence is not necessary evidence of absence, as it might be due to lack of available data. However, unless there is strong competitive advantage of being risk neutral in some industry I would not expect most people there being risk neutral. The study of <a href="https://poseidon01.ssrn.com/delivery.php?ID=877004071119088010103096124088072072042016062081050044108029003009081075030088093026119022001101020104098127074073002120115029066064060078065104019077010106109095082011024089000081088001095104098010102078087006025094088122075028089075102028092026&amp;EXT=pdf" rel="nofollow noreferrer">Dohmen et al. (2005)</a> conducted on a general population in Germany (they had a nice representative sample of 22,000 individuals) showed that <span class="math-container">$78\%$</span> of people are risk averse, <span class="math-container">$13\%$</span> risk neutral and <span class="math-container">$9\%$</span> to be risk loving. Since the study is quite representative I would expect that it would be generally true for most people. Unless there is some competitive pressure for certain type of individual in the particular industry attitudes of people there should follow the distribution in general population.</p>
<p>Risk attitudes definitely evolve over time (see for example <a href="https://www.tandfonline.com/doi/abs/10.1080/13504851.2013.835470" rel="nofollow noreferrer">this</a> and <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3024983" rel="nofollow noreferrer">this</a> paper), it can even be molded by researchers priming the subjects (see <a href="https://academic.oup.com/rof/article-abstract/12/3/567/1597444" rel="nofollow noreferrer">here</a>), but there seem to be no research suggesting that some periods favor risk neutrality as opposed to others. In fact, risk attitudes can be affected by your emotions as well (see <a href="https://www.researchgate.net/profile/Christopher_Hsee/publication/230896630_Risk_As_Feelings/links/09e4150fe81ba4af2a000000/Risk-As-Feelings.pdf" rel="nofollow noreferrer">Loewenstein et al., 2001</a>) so they are definitely not stable.</p>

CC BY-SA 4.0
2020-06-18T10:42:13.537Z
Would the downvoter care to add some constructive criticism in the comments?
Richard Hardy
CC BY-SA 4.0
2020-06-18T10:47:47.070Z
Thank you for your answer! I find it helpful.
Richard Hardy
CC BY-SA 4.0
2020-06-18T10:55:19.333Z
@RichardHardy I am glad you found it helpful - I think that was just another revenge downvote during past month I get consistently(-1) almost every day on one of my posts without any explanation and it seems to be from a single user
1muflon1
CC BY-SA 4.0
2020-06-18T10:57:22.413Z
This has happened to me before, though not on a big a small scale and only in a tight interval of time. Consider informing the moderators, perhaps they can help cool the user down (this worked for me on Cross Validated)...
Richard Hardy
CC BY-SA 4.0
2020-06-18T11:06:09.123Z
@RichardHardy I already did they marked my flag as helpful and in fact after I also reported it to the SE. after reporting it to the SE it stopped for about a week but seems that it was just a break. So I am not sure if that helped however at this point I am starting to just ignore it usually other people still recognize whether the answer is useful or not... it’s shame that someone feels need to abuse the system in this way as it hurts site’s credibility but what you gonna do
1muflon1
CC BY-SA 4.0
2020-06-18T11:08:18.037Z
I am sorry to hear that. At least your reputation score still shows, despite such vandalism, how much the community appreciates your contributions :)
Richard Hardy
CC BY-SA 4.0
2020-06-18T10:26:19.813Z
2020-06-18T13:37:05.953Z
2020-06-18T13:37:05.953Z
1muflon1
<p>I am looking for examples of approximately risk-neutral firms or people in business.</p>
<p>Is there an industry where risk-neutrality is common for some agents (firms or people)?<br />
Are there perhaps time periods when some agents in some industries turn risk neutral?<br />
Could some investors be argued to be risk neutral?<br />
Is there a literature on risk-neutrality with real-world examples?</p>
<p>I would especially appreciate examples of non-extreme cases if such ones exist.</p>

<reference-request><preferences><risk-aversion>
Examples of risk-neutral firms or people in business
Richard Hardy
# Examples of risk-neutral firms or people in business

(Asked by: username_0 on 2020-06-18)

I am looking for examples of approximately risk-neutral firms or people in business.

Is there an industry where risk-neutrality is common for some agents (firms or people)?  
Are there perhaps time periods when some agents in some industries turn risk neutral?  
Could some investors be argued to be risk neutral?  
Is there a literature on risk-neutrality with real-world examples?

I would especially appreciate examples of non-extreme cases if such ones exist.

**Tags:** reference-request, preferences, risk-aversion


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## 1 answers

### Answer by username_1 on 2020-06-18. Score: 4 | Accepted answer

Its very hard to give an actual real world example of risk neutral person (firms are just run by people only people can have attitudes to risk) not because they do not exist but because research on micro-level risk neutrality does not publishes name of its participants and all data are anonymized. You also can't say someone is risk neutral just by pointing toward some non-experimental decision they made in real world as in such situation there might be a lot of different effects in play that you cant control for. That being said, there are some studies that try to empirically measure risk attidudes for industries just not really giving particular examples.

For example, [Pennings & Philip Garcia (2001)](https://onlinelibrary.wiley.com/doi/abs/10.1111/0002-9092.00225) examine the risk attitudes in Dutch farming industry using the certainty equivalence technique. The authors report that in their sample $6\%$ of farmers were shown to be risk neutral, $34\%$ risk averse and $60\%$ risk seeking (see their table 3), but of course they will not provide names of those individuals. So based on this we can conclude that $6\%$ of Dutch farmers out of 373 included in the study were risk neutral.

When it comes to investors, for example [Dorn and Huberman (2005)](https://academic.oup.com/rof/article-abstract/9/4/437/1604936) use survey data on self reported attitudes to risk of German investors. The data show that actually most investors are neither too risk averse neither too risk loving. Unfortunately, this does not necessary imply they are *exactly* risk neutral as they could be just slightly risk averse or risk loving. It is hard to measure what proportion of people are exactly risk neutral outside some experimental framework, but this would seem to suggest some risk-neutral investors probably exist.

I could not find any example of an industry where empirically risk neutral people would dominate. That being said, absence of evidence is not necessary evidence of absence, as it might be due to lack of available data. However, unless there is strong competitive advantage of being risk neutral in some industry I would not expect most people there being risk neutral. The study of [Dohmen et al. (2005)](https://poseidon01.ssrn.com/delivery.php?ID=877004071119088010103096124088072072042016062081050044108029003009081075030088093026119022001101020104098127074073002120115029066064060078065104019077010106109095082011024089000081088001095104098010102078087006025094088122075028089075102028092026&EXT=pdf) conducted on a general population in Germany (they had a nice representative sample of 22,000 individuals) showed that $78\%$ of people are risk averse, $13\%$ risk neutral and $9\%$ to be risk loving. Since the study is quite representative I would expect that it would be generally true for most people. Unless there is some competitive pressure for certain type of individual in the particular industry attitudes of people there should follow the distribution in general population.

Risk attitudes definitely evolve over time (see for example [this](https://www.tandfonline.com/doi/abs/10.1080/13504851.2013.835470) and [this](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3024983) paper), it can even be molded by researchers priming the subjects (see [here](https://academic.oup.com/rof/article-abstract/12/3/567/1597444)), but there seem to be no research suggesting that some periods favor risk neutrality as opposed to others. In fact, risk attitudes can be affected by your emotions as well (see [Loewenstein et al., 2001](https://www.researchgate.net/profile/Christopher_Hsee/publication/230896630_Risk_As_Feelings/links/09e4150fe81ba4af2a000000/Risk-As-Feelings.pdf)) so they are definitely not stable.

> **Comments:**
> **username_0**: Would the downvoter care to add some constructive criticism in the comments?  
> **username_0**: Thank you for your answer! I find it helpful.  
> **username_1**: @RichardHardy I am glad you found it helpful - I think that was just another revenge downvote during past month I get consistently(-1) almost every day on one of my posts without any explanation and it seems to be from a single user  
> **username_0**: This has happened to me before, though not on a big a small scale and only in a tight interval of time. Consider informing the moderators, perhaps they can help cool the user down (this worked for me on Cross Validated)...  
> **username_1**: @RichardHardy I already did they marked my flag as helpful and in fact after I also reported it to the SE. after reporting it to the SE it stopped for about a week but seems that it was just a break. So I am not sure if that helped however at this point I am starting to just ignore it usually other people still recognize whether the answer is useful or not... it’s shame that someone feels need to abuse the system in this way as it hurts site’s credibility but what you gonna do  
> **username_0**: I am sorry to hear that. At least your reputation score still shows, despite such vandalism, how much the community appreciates your contributions :)  

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