Measures of individual risk attitudes and portfolio choice: Evidence from pension participants |
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| Affiliation: | 1. Department of Economics, Boğaziçi University, Bebek, Istanbul 34342, Turkey;1. Departamento de Ciencias Físicas, Universidad de La Frontera, Casilla 54-D, Temuco, Chile;2. Facultad de Ciencias Económicas y Administrativas, Universidad Austral de Chile, Valdivia, Chile;1. Department of Economics, University of Birmingham, United Kingdom;2. School of Economics, University of Nottingham, United Kingdom;1. Department of Economics, Wagner College, and Center for International Policy Studies, Fordham University, NY, USA;2. Department of Economics, Monash Business School, Monash University, Australia;3. Department of Economics and Center for International Policy Studies, Fordham University, NY, USA;4. Population Studies Center, University of Pennsylvania, PA, USA;5. IZA, Bonn, Germany;1. Peking University, 5 Yiheyuan Road, Haidian District, Beijing, 100871, China;2. Department of Business, University of Wisconsin-Parkside, 900 Wood Road, Kenosha, WI 53141-2000, USA;1. School of Management, Polytechnic Institute of Cávado and Ave, 4750-180 Barcelos, Portugal;2. NIPE – School of Economics and Management, University of Minho, Gualtar, 4710-057 Braga, Portugal |
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| 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. |
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| Keywords: | Retirement Equity allocation Stock market participation Risk aversion Experiment 3920 C93 D14 D81 E21 |
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