Measuring individual risk attitudes in the lab: Task or ask? An empirical comparison

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. This series presents research findings based either directly on data from the German SocioEconomic Panel Study (SOEP) or using SOEP data as part of an internationally comparable data set (e.g. CNEF, ECHP, LIS, LWS, CHER/PACO). SOEP is a truly multidisciplinary household panel study covering a wide range of social and behavioral sciences: economics, sociology, psychology, survey methodology, econometrics and applied statistics, educational science, political science, public health, behavioral genetics, demography, geography, and sport science. Terms of use: Documents inThe decision to publish a submission in SOEPpapers is made by a board of editors chosen by the DIW Berlin to represent the wide range of disciplines covered by SOEP. There is no external referee process and papers are either accepted or rejected without revision. Papers appear in this series as works in progress and may also appear elsewhere. They often represent preliminary studies and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be requested from the author directly. (Berg, Dickaut, McCabe, 1995). As it turns out, the measures themselves are uncorrelated (both times) and, most importantly, only the questionnaire measure exhibits test-re-test stability (ρ = .78), while virtually no such stability is found in the lottery-choice task. In addition, only the questionnaire measure shows the expected correlations with a Big Five personality measure and is correlated with actual risk-taking behaviour. The results suggest that the questionnaire is the more adequate measure of individual risk attitudes for the analysis of behaviour in economic (lab) experiments. Moreover, with respect to trust, the high re-test stability of trust transfers (ρ = .70) further supports the conjecture that trusting behaviour indeed has a component which itself is a stable individual characteristic (Glaeser, Laibson, Scheinkman and Soutter, 2000).

The psychometric and empirical properties of measures of risk preferences

“…These numbers suggest that transitory variance is lower in our sample than in the HRS, and that caution is warranted when disattenuating estimates based on estimated reliabilities from other samples. Lönnqvist et al (2014) report retest rank correlations of 0.55 for the Risk Financial question and 0.77 for the Risk General question in a small sample of German subjects, which is broadly consistent with the findings of this paper. They also report a substantially lower reliability, a rank correlation of 0.26, for a laboratory-based measure of risk aversion in which subjects' preferences are elicited by measuring attitudes over small-stakes gambles with real monetary payoffs.…”

“…We first estimate a sizable and highly significant measurement-error-adjusted correlation between risk attitudes and the personality trait behavioral inhibition. The estimated correlation between behavioral inhibition and risk attitudes increases by about 50% after adjustment for measurement error, and the adjusted estimate of 0.45 is substantially higher than previously reported correlations between risk attitudes and personality traits (Becker et al 2012;Dohmen et al 2010;Lönnqvist et al 2014). We then provide another illustration of the importance of adjusting for measurement error, by reporting rough estimates of the share of the variation of risk attitudes that is attributable to genetic factors.…”

“…In contrast, relatively little effort has been devoted to studying the reliabilities and predictive validities of the measures used in economics. The research that does address or touch upon these questions suggests the measures are subject to significant measurement error (Barsky et al 1997;Gillen et al 2015;Harrison et al 2005;Sahm 2012;Kimball et al 2008;Lönnqvist et al 2014) and have only limited predictive validity.…”

Risk, Loss, and Ambiguity Aversion after a Natural Disaster

“…A well-established literature focuses on how to develop risk, loss, and ambiguity aversion elicitation mechanisms that deliver realistic, reasonable and stable measures (see for example Thaler 1981, Loewenstein 1988, or more recently Andersen et al 2008, andLönnqvist et al 2015). Instead of using absolute measures, our study focuses only on relative measures.…”

“…Consequently, our measurement tasks are relatively simple -both in terms of respondent task comprehension and experimenter implementation. The current literature debates whether task-based or direct questions are best to elicit preferences (e.g., Lönnqvist et al 2015, Charness et al 2013, Dohmen et al, 2011a. In this article we chose the former, recognizing the debate is still underway.…”