Individual Risk Attitudes: Measurement, Determinants, And Behavioral Consequences

Journal of the European Economic Association (Impact Factor: 1.36). 05/2011; 9(3):522-550. DOI: 10.1111/j.1542-4774.2011.01015.x
Source: RePEc


This paper studies risk attitudes using a large representative survey and a complementary experiment conducted with a representative subject pool in subjects' homes. Using a question asking people about their willingness to take risks “in general”, we find that gender, age, height, and parental background have an economically significant impact on willingness to take risks. The experiment confirms the behavioral validity of this measure, using paid lottery choices. Turning to other questions about risk attitudes in specific contexts, we find similar results on the determinants of risk attitudes, and also shed light on the deeper question of stability of risk attitudes across contexts. We conduct a horse race of the ability of different measures to explain risky behaviors such as holdings stocks, occupational choice, and smoking. The question about risk taking in general generates the best all-round predictor of risky behavior.

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    • "). Alternatively to the SCF question, Kapteyn and Teppa (2002) use the answers to the self-assessed risk question in the questionnaire submitted to the panel of CentERdata in the Netherlands, while Dohmen et al. (2009) make use of the German Socio-Economic Panel (SOEP) for the same purpose. Roszkowski and Grable (2005) employ clients' self-ratings to test the degree of accuracy financial advisors and clients have in estimating risk tolerance. "
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    ABSTRACT: Investors’ financial risk tolerance is crucial in the formulation of suitable financial advice; in the past, assessment efforts relied on multiple approaches and techniques but their consistency is still an issue. We focus on two metrics traditionally proposed (self-assessment and portfolio composition) and we test their mutual consistency on a sample of 2,374 investors. Our approach allows us to discriminate between inconsistencies due to wrong portfolio compositions and those arising from wrong self-assessments. We show that low financial literacy, high income, no children and incautious economic behavior are commonly associated with such inconsistencies.
    Journal of Behavioral Finance 09/2015; Forthcoming. · 0.14 Impact Factor
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    • "Consistent with experimental findings for adults (e.g., Datta Gupta et al. 2013; Niederle and Vesterlund 2007; Dohmen et al. 2012), the evidence suggests that girls are less inclined to compete (Sutter and Rützler, 2010). 6 However, unlike findings for adults, the gender gap is not robust to gender-neutral (Samak 2013) or " girly " tasks (Dreber et al. 2011; Cárdenas et al. 2012; Khachatryan, 2011) or to cultural contexts (Booth and Nolen 2012b; Andersen et al. 2013). "
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    DESCRIPTION: Using unique panel data, we compare cognitive performance and wagering behavior of children (10-11 years) with adults playing in the Swedish version of the TV-shows Jeopardy and Junior Jeopardy.
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    • "The relationship between risk perception and actual risk behavior is of interest to experimental researchers. For example, as mentioned in previous sections, the results of Anderson and Mellor (2009), and Kruse and Thompson (2003) are in line with our observations that indicate the differentiation between risk perception and actual behavior; however Dohmen et al. (2011), and Cummings et al. (2009) disagree with our results because they found association between different procedures. "
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    DESCRIPTION: In this paper, we analyze and link self-reported risk perception data obtained from surveys and experimentally elicited risk parameters and use them to explain online shopping behavior. We find that self-reported risk data turn out to be not correlated with the actual risk parameters. Although risk perceptions do not play a significant role in explaining binary online shopping behavior, risk parameters of the subjects elicited via a new hybrid experimental methodology play a very important role. The data also reveals that actually risk-averse subjects tend to report themselves to be just as risk-loving as the ones who exhibit risk-loving behavior.
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