Towards a typology of risk preference: Four risk profiles describe two-thirds of individuals in a large sample of the U.S. population

Renato Frey (), Shannon M. Duncan and Elke U. Weber
Additional contact information
Renato Frey: University of Zurich
Shannon M. Duncan: Columbia University
Elke U. Weber: Princeton University

Journal of Risk and Uncertainty, 2023, vol. 66, issue 1, No 1, 17 pages

Abstract: Abstract It has been a longstanding goal of the behavioral sciences to measure and model people’s risk preferences. In this article, we adopt a novel theoretical perspective of doing so and test to what extent specific types of individuals share similar risk profiles (i.e., configurations of multidimensional risk preferences). To this end, we analyzed data of a U.S. sample (N = 3,123) in a comprehensive and rigorous way, resulting in a twofold contribution. First, based on data from the Domain-Specific Risk-Taking scale (DOSPERT) and using a cross-validation procedure, we established a multidimensional trait space including general and domain-specific dimensions of risk preference. Second, we employed model-based cluster analyses in this multidimensional trait space, finding that 66% of participants can be described well with four basic risk profiles. In sum, the typological perspective proposed in this article has important implications for current theories of risk preference and the measurement of individual differences therein.

Keywords: Risk preference; Psychometric modeling; DOSPERT; Bayesian latent profile analyses (search for similar items in EconPapers)
JEL-codes: C11 C38 C63 D81 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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DOI: 10.1007/s11166-022-09398-5

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