Domain Effects and Financial Risk Attitudes

Ivo Vlaev, Petko Kusev, Neil Stewart, Silvio Aldrovandi, Nick Chater

Research output: Contribution to journalArticle

17 Citations (Scopus)

Abstract

We investigated whether financial risk preferences are dependent on the financial domain (i.e., the context) in which the risky choice options are presented. Previous studies have demonstrated that risk attitudes change when gambles are framed as gains, losses, or as insurance. Our study explores this directly by offering choices between identical gambles, framed in terms of seven financial domains. Three factors were extracted, explaining 68.6% of the variance: Factor 1 (Positive)-opportunity to win, pension provision, and job salary change; Factor 2 (Positive-Complex)-investments and mortgage buying; Factor 3 (Negative)-possibility of loss and insurance. Inspection of the solution revealed context effects on risk perceptions across the seven scenarios. We also found that the commonly accepted assumption that women are more risk averse cannot be confirmed with the context structure suggested in this research; however, it is acknowledged that in the students' population the variance across genders might be considerably less. These results suggest that our financial risk attitude measures may be tapping into a stable aspect of "context dependence" of relevance to real-world decision making.
Original languageEnglish
Pages (from-to)1374-86
Number of pages13
JournalRisk Analysis
Volume30
Issue number9
DOIs
Publication statusPublished - 14 Sep 2010
Externally publishedYes

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Vlaev, I., Kusev, P., Stewart, N., Aldrovandi, S., & Chater, N. (2010). Domain Effects and Financial Risk Attitudes. Risk Analysis, 30(9), 1374-86. https://doi.org/10.1111/j.1539-6924.2010.01433.x