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Measures of individual risk attitudes and portfolio choice: Evidence from pension participants

Mehmet Gurdal, Tolga Kuzubas () and Burak Saltoğlu

Journal of Economic Psychology, 2017, vol. 62, issue C, 186-203

Abstract: We use a large non-student sample to test how distinct measures of risk-attitudes relate to each other, to demographic characteristics and to real-life risk taking in the financial domain. These measures, namely the Bomb Risk Elicitation Task (BRET), self-reported willingness to take risks in general, the choice in a hypothetical lottery, the score in the Domain Specific Risk-Taking (DOSPERT) scale, appear to be positively correlated and exhibit a certain degree of consistency. Furthermore, a subset of these measures is driven by similar demographic characteristics as such that males are more risk seeking and risk-aversion increases with age. Using extensive data on the retirement portfolios of the participants during the years 2008–2014, we find that all of these measures are positively correlated with the riskiness of individual portfolios. The self-reported willingness to take risks in general appears to be the most relevant measure in predicting actual risk-taking behavior.

Keywords: Retirement; Equity allocation; Stock market participation; Risk aversion; Experiment (search for similar items in EconPapers)
JEL-codes: C93 D14 D81 E21 (search for similar items in EconPapers)
Date: 2017
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Working Paper: Measures of Individual Risk Attitudes and Portfolio Choice: Evidence from Pension Participants* (2016) Downloads
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