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

• Published in: Journal of economic psychology 2017-10, Vol.62, p.186-203
• Main Authors: Gürdal, Mehmet Y., Kuzubaş, Tolga U., Saltoğlu, Burak
• Format: Article
• Language: English
• Subjects: Equity allocation; Experiment; Retirement; Risk aversion; Stock market participation
• ISSN: 0167-4870; 1872-7719
• DOI: 10.1016/j.joep.2017.06.010

•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.•We employ four different measures: the BRET, self-assessment, a hypothetical lottery and DOSPERT.•Measured risk attitudes correlate with each other, with certain demographics and with risk-taking in real life decisions.•The self-reported willingness to take risks in general appears to be the most relevant measure in predicting actual risk-taking behavior. 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.