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

ABSTRACT 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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Available from: Armin Falk, Sep 03, 2015
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    • "In a later study, Dohmen et al. (2011), using a method akin to the DOSPERT scale, found that the best predictor of behaviour in a particular domain was the corresponding domain-specific measure, although the general risk question had some predictive power across domains as well. When heterogeneity in risk preferences among individuals is investigated , it is conventional to assume that utility is linear in the probabilities . "
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    ABSTRACT: This paper examines how risk preferences and loss aversion affect individual choices regarding environmental risks, specifically forest wildfires in Poland. We also examine how the same individuals make choices in the context of financial risks. Estimating risk, loss aversion and weighting probability parameters allows us to directly test whether Prospect Theory or Expected Utility Theory is the better underlying behavioural model in both domains. We find that in a sample consisting of a general population of Poles, the majority of respondents demonstrate behaviour consistent with Prospect Theory in both environmental and financial domains. This finding has significant implications for future non-market valuation studies. Additionally, in this study, we find evidence for similar risk preferences across those two domains.
    Ecological Economics 08/2015; 116. DOI:10.1016/j.ecolecon.2015.05.006 · 2.52 Impact Factor
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    • "Are you generally a person who is fully prepared to take risks in financial matters or do you try to avoid taking risks? " (Dohmen et al. 2011). Responses were collected using an (unnumbered) slider with " Unwilling to take risks in financial matters " on the left extreme, and " Fully prepared to take risks in financial matters " on the right extreme. "
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    • "); Schubert et al. (1999); Grable (2000); Hallahan et al. (2004); Moreschi (2004); Yao et al. (2005); Al-Ajmi (2008); Gilliam et al. (2010); Neelakantan (2010); and Dohmen et al. (2011). However, another group of researchers has found an insignificant relationship between gender and risk tolerance (Grable & Joo, 1999). "
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