Determinants of Risky Decision-Making Behavior: A Test of the Mediating Role of Risk Perceptions and Propensity.

Sitkin, Sim B.; Weingart, Laurie R.

doi:10.2307/256844

Cited by 855 publications

(595 citation statements)

References 35 publications

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“…Some problems remain: Risk perception, risk attitute and risk taking have to be considered and measured separately. The separation of these three concepts is often neglected in the literature but the first promising results in examining these issues separately justifies further research (Weber/Milliman 1997;Sitkin/Weingart 1995). The formation of aspiration levels in financial decision making (as well as in other contexts) is also still an open question that has to be addressed by future research.…”

Section: Conclusion and Directions For Future Researchmentioning

confidence: 99%

“…It should be stressed that this examination concentrates entirely on risk perception and does not address people's risk preferences or risky choice. The important distinction between risk perception and risk attitude which both moderate risk behavior has not been drawn in the relevant literature until a few years ago (Sitkin/Pablo 1992;Sitkin/Weingart 1995;Weber/Milliman 1997).…”

Section: Design and Hypothesesmentioning

confidence: 99%

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Lower partial moments as measures of perceived risk: An experimental study

Unser¹

2000

Journal of Economic Psychology

121

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Abstract:The paper reports the results of an experiment on individual investors' risk perception in a stock market context under two different modes of information presentation (framings). While the concentration on two moments of a return distribution has been a cornerstone of neo-classic finance theory from the start (Markowitz 1952) an alternative's mean and variance have been selected more by convenience and ease of computation than by theoretical or empirical justification. Even though the most influential models are based on variance as risk measure there has always been much discontent with this proposal. The symmetrical nature of variance does not capture the common notion of risk as something undesired, e. g. negative deviations from a reference point. Instead, lower partial moments (LPM) seem to be more appropriate for measuring risk. The purpose of this paper is to examine experimentally private investors' risk perception in a financial context. The focus is on the correspondence of people's risk perceptions with specific LPMs. The main findings can be summarized as follows. First, symmetrical risk measures like variance can be clearly dismissed in favor of shortfall measures like LPMs. Second, the reference point (target) of individuals for defining losses is not a distribution's mean but the initial price in a time series of stock prices. Third, the LPM which explains risk perception best is the LPM 0 , i. e. the probability of loss. Fourth, the framing of price distributions (histograms versus charts) exerts a significance influence on average risk ratings, the latter being higher for the histogram framing. Fifth, positive deviations from an individual reference point tend to decrease perceived risk.

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Section: Conclusion and Directions For Future Researchmentioning

confidence: 99%

Section: Design and Hypothesesmentioning

confidence: 99%

Lower partial moments as measures of perceived risk: An experimental study

Unser¹

2000

Journal of Economic Psychology

121

View full text Add to dashboard Cite

show abstract

“…This measure should be less sensitive to social desirability biases (Turnley and Bolino 2001) than common measures that focus on risk propensity (Sitkin and Pablo 1992;Sitkin and Weingart 1995;White et al 2006), as project managers do not rate their own risk preference or risk-taking behavior, but instead describe their practical experience with project management. An alternative measure would have been to ask participants whether they consider their estimates to be more optimistic or pessimistic, but again we would face social desirability and self-perception biases: No experienced project manager could, for example, be expected to admit that she or he is repeatedly underestimating task-completion times or risk occurrence probabilities.…”

Section: Risk Awarenessmentioning

confidence: 99%

Project managers’ overconfidence: how is risk reflected in anticipated project success?

Fabricius

Büttgen

2015

Bus Res

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Projects tend to exceed planned timelines and budgets. One reason may be that potential project risks are insufficiently reflected in anticipations of project success. Furthermore, project managers’ overconfidence may lead them to assess risk in a biased manner. The present study examines how risk assessment relates to overall anticipated project success and how overconfidence on the part of project managers influences such assessments. We assume that project managers’ risk awareness serves as a mediator between overconfidence and risk assessment. To observe the planning behavior of 204 project managers, we used a standardized, case-based survey. The results show that overconfidence reduces risk awareness among project managers, leading them to assess risks more optimistically and come to more positive conclusions about anticipated project success. When judging project success, project managers only consider the probability of a risk occurring; they do not factor in the impact of said risks on project success should the risks arise. Risks thus seem to be insufficiently reflected in anticipations of project success which might be a reason for high failure rates of projects.

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“…(1= "significant opportunity" to 7= "significant risk" - [9]). Trust is measured by "For doing [actions related to the technology], I feel I can depend on the [technology]."…”

Section: Methodsmentioning

confidence: 99%

An Empirical Test of How Events Turn the Cognitive Gears of Trust

McKnight

Liu

2013

Trust Management VII

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Abstract. This study empirically tests a social psychology-based Information Processing Model (IPM) that explains how events may change trust over time based on three cognitive mechanisms or "gears": attention, attribution, and judgment. We briefly describe the IPM, and then empirically validate its assumptions and extensions. The IPM is contrasted with the incremental growth model (IGM) of trust change. We find more support for the IPM than the IGM.Keywords: Trust, attention, attribution, threshold, risk, illusion, change. IntroductionHow does trust in another party change in response to a series of events over time? How do cognitive mechanisms produce trust changes over time? Few studies have addressed these questions (e.g., [3]). These questions are vital because trust in a technology changes over time. Further, the world is becoming scarier in terms of how adroitly online agents are attacking targets once considered safe, which changes trust. McKnight et al.[6] addressed these questions by developing a psychology-based information processing model (IPM) of the major cognitive mechanisms involved in trust changes. Then they simulated the model to illustrate how it works under a set of plausible yet untested assumptions. But their assumptions may or may not be right. Incorrect assumptions would render the IPM useless. We test their assumptions.The IPM can serve as a basic way to depict trust changes in the cyber world. By trust we mean a willingness to be vulnerable to another party [4]. See McKnight et al.[6] for the general developmental process theory approach behind this paper and the rationale for the theoretical model being tested. We next briefly describe the IPM. Then we explain the empirical methods used. We report the results, which validate much of the IPM and suggest refinements. This study enhances the model's value. 2The Baseline Information Processing Model Model OverviewModel action initiates when an event takes place that may have trust ramifications (Figure 1, 1. Event). The event may be an interaction with the trustee, or it may be some signal or second-hand report about the trustee (e.g., media reports).

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Determinants of Risky Decision-Making Behavior: A Test of the Mediating Role of Risk Perceptions and Propensity.

Cited by 855 publications

References 35 publications

Lower partial moments as measures of perceived risk: An experimental study

Lower partial moments as measures of perceived risk: An experimental study

Project managers’ overconfidence: how is risk reflected in anticipated project success?

An Empirical Test of How Events Turn the Cognitive Gears of Trust

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