Estimating Risky Behavior with Multiple-Item Risk Measures: An Empirical Examination

Menkhoff, Lukas; Sakha, Sahra

doi:10.2139/ssrn.2843437

Cited by 2 publications

(3 citation statements)

References 26 publications

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“…However, the risk attitude cannot be only measured directly based on the expected utility, U(X), because it also depends on the strength of the preference ("not to risk"), represented by V(X) [30][31][32], where X corresponds to the income (a specific amount), in order to obtain a more accurate measure of the risk attitude, which is known as a "True Equivalent" measure [33]. True Equivalent is a certain amount of money, and a person is indifferent to whether there is a secure payment or uncertain payments of a certain investment [34].…”

Section: Introductionmentioning

confidence: 99%

Analysis of Farmers’ Stated Risk Using Lotteries and Their Perceptions of Climate Change in the Northwest of Mexico

Kallas

Herrera

2018

Agronomy

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Risk attitudes are relevant factors affecting production, management and investment decisions at the farm level. They are key factors related to farmers’ attitudes towards the environment and climate change. Several methodological approaches, which were considered to be preferable for measuring the level of risk of an economic agent, ranging from highly risk-tolerant to highly risk-averse attitudes, are available. The Multiple Price List (MPL) method is one of the stated approaches that is gaining relevance. In this study, we apply the MPL and relate the risk outcomes to farmers’ socio-economic characteristics and their perceptions of the environment and climate change. Data were collected using a face-to-face survey, carried out with a group of 370 farmers of an irrigation district, located in the northwest of Mexico. The results showed a risk level of about 0.32, according to the Constant Relative Risk Aversion (CRRA) coefficient, locating farmers of the region in a risk-averse group. The heterogeneity analysis showed that the socioeconomic factors and the perceptions of climate change are related to the farmers´ stated risk level. Farmers who are young women, with a tendency to use public support for structural investment, were shown to be risk-tolerant. Farmers considered floods, hail, diseases, pests, and weed growth incidences to be the most frequent weather patterns in the region.

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Section: Introductionmentioning

confidence: 99%

Analysis of Farmers’ Stated Risk Using Lotteries and Their Perceptions of Climate Change in the Northwest of Mexico

Kallas

Herrera

2018

Agronomy

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“…Harrison et al (2007); Kapteyn and Teppa (2011)). Therefore, to measure normative risk preferences as closely as possible, one should combine multiple relevant measures of risk preferences (Kapteyn and Teppa, 2011;Menkhoff and Sakha, 2016). By analysing the joint correlation of different methods, one eliminates measurement noise and method-specific biases and the normative value of elicited risk preferences increases.…”

Section: Measuring Normative Risk Preferencesmentioning

confidence: 99%

“…Using item response theory (IRT), the results of the three methods are combined into a single composite risk aversion score. This composite score is the closest available approximation to the latent variable normative risk preferences (Menkhoff and Sakha, 2016) and can benefit from both the simplicity of the self-description method and the quantitative value of the MLC method.…”

Section: Introductionmentioning

confidence: 99%

Measuring Normative Risk Preferences

Alserda

2017

SSRN Journal

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The results of eliciting risk preferences depend on the elicitation method. Different methods of measuring the same variable tend to produce different results. This raises the question whether normative risk preferences can be elicited at all. Using two types of manipulation, I assess the normative value of risk preference elicitation methods. Following IRT, the results of the multiple lottery choice method are combined with two qualitative methods into a composite score. The responses of 9,235 pension fund members to a dedicated survey indicate this composite score approximates the latent variable normative risk preferences better than individual method responses do, substantially reducing measurement noise and method-specific biases. Analysis of the manipulations shows that both the results and the normative value of the risk preference elicitation methods depend on the specific amounts, order, and endowment chosen. Combining simpler methods with more advanced methods framed closely to the relevant situation increases the normative value of elicited risk preferences.

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Estimating Risky Behavior with Multiple-Item Risk Measures: An Empirical Examination

Cited by 2 publications

References 26 publications

Analysis of Farmers’ Stated Risk Using Lotteries and Their Perceptions of Climate Change in the Northwest of Mexico

Analysis of Farmers’ Stated Risk Using Lotteries and Their Perceptions of Climate Change in the Northwest of Mexico

Measuring Normative Risk Preferences

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