Eliciting risk preferences: is a single item enough?

Don C. Zhang, Gino Howard, Russell A. Matthews and Tyler Cowley

Journal of Risk Research, 2023, vol. 26, issue 12, 1422-1438

Abstract: Economists and psychologists frequently use single-item measures of risk preferences despite potential limitations in reliability and criterion validity compared to their multi-item counterparts. This can be particularly problematic when individual differences in risk preferences are used to predict real-world economic, health, and financial outcomes. In this paper, we compare a popular single-item measure of risk preference, the General Risk Question (GRQ), to multi-item measures of domain-general and specific risk preference measures. In a two-wave survey study of 434 adults, we found that the GRQ had good psychometric reliability and converged with other multi-item measures of risk preferences. The GRQ also exhibited a similar pattern of associations with other personality and demographic variables as compared to multi-item measures. However, the predictive validity of the GRQ was lower than multi-item measures for most of the outcomes examined. The GRQ also explained less incremental variance for real-world outcomes over the Big Five personality traits than the multi-item counterparts. Although the GRQ is a construct-valid measure of risk preferences, researchers should nonetheless consider the trade-off between survey efficiency and predictive efficacy when deciding whether a single item is enough.

Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:taf:jriskr:v:26:y:2023:i:12:p:1422-1438

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DOI: 10.1080/13669877.2023.2288016

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