A test of traditional and psychometric relative risk tolerance measures on household financial risk taking

John E. Grable, Angela C. Lyons and Wookjae Heo

Finance Research Letters, 2019, vol. 30, issue C, 8-13

Abstract: This article provides a comparative test of two ways in which individual relative risk tolerance is commonly measured in research and practice. Results suggest that the popular method of measuring gambles across lifetime income provides less insight into household investment behavior than the psychometric approach that is often used to derive a risk profile measure.

Keywords: Risk aversion; Risk tolerance; Income gambles; Psychometric assessment (search for similar items in EconPapers)
JEL-codes: D14 D81 D9 G11 G41 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:30:y:2019:i:c:p:8-13

DOI: 10.1016/j.frl.2019.03.012

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