Does good advice come cheap? - On the assessment of risk preferences in the lab and the field

Andrea Leuermann and Benjamin Roth

No 534, Working Papers from University of Heidelberg, Department of Economics

Abstract: Advice is important for decision making, especially in the financial sector. We investigate how individuals assess risk preferences of others given sociodemographic information or pictures. Both non-professionals and fi nancial professionals participate in this artefactual field experiment. Subjects mainly rely on the other's self-assessment of risk preferences and on gender when forming the belief about someone else's risk preferences. On average, subjects consider themselves to be more risk-tolerant than the person they evaluate. Subjects use their own risk attitude as a reference point for predicting others' risk preferences. This false consensus eff ect is less pronounced for young professionals than for senior and non-professionals. Furthermore, financial professionals predict risk preferences more accurately compared to non-professionals.

Keywords: Risk Preferences; Financial Advice; Artefactual Field Experiment; Behavioral Finance (search for similar items in EconPapers)
JEL-codes: C91 D81 G02 (search for similar items in EconPapers)
Date: 2012-08-03
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-upt
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Citations: View citations in EconPapers (11)

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