Domain Effects and Financial Risk Attitudes

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

Research output: Contribution to journalArticle

16 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.
LanguageEnglish
Pages1374-86
Number of pages13
JournalRisk Analysis
Volume30
Issue number9
DOIs
Publication statusPublished - 14 Sep 2010
Externally publishedYes

Fingerprint

Insurance
Risk perception
Wages
Pensions
Salaries and Fringe Benefits
Inspection
Decision making
Students
Decision Making
Research
Population

Cite this

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
Vlaev, Ivo ; Kusev, Petko ; Stewart, Neil ; Aldrovandi, Silvio ; Chater, Nick. / Domain Effects and Financial Risk Attitudes. In: Risk Analysis. 2010 ; Vol. 30, No. 9. pp. 1374-86.
@article{bf30991176de4c649497d2e10be2dff8,
title = "Domain Effects and Financial Risk Attitudes",
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.",
keywords = "financial risk, framing effects, risk attitudes, risk perception",
author = "Ivo Vlaev and Petko Kusev and Neil Stewart and Silvio Aldrovandi and Nick Chater",
note = "{\circledC} 2010 Society for Risk Analysis.",
year = "2010",
month = "9",
day = "14",
doi = "10.1111/j.1539-6924.2010.01433.x",
language = "English",
volume = "30",
pages = "1374--86",
journal = "Risk Analysis",
issn = "0272-4332",
publisher = "Wiley-Blackwell",
number = "9",

}

Vlaev, I, Kusev, P, Stewart, N, Aldrovandi, S & Chater, N 2010, 'Domain Effects and Financial Risk Attitudes', Risk Analysis, vol. 30, no. 9, pp. 1374-86. https://doi.org/10.1111/j.1539-6924.2010.01433.x

Domain Effects and Financial Risk Attitudes. / Vlaev, Ivo; Kusev, Petko; Stewart, Neil; Aldrovandi, Silvio; Chater, Nick.

In: Risk Analysis, Vol. 30, No. 9, 14.09.2010, p. 1374-86.

Research output: Contribution to journalArticle

TY - JOUR

T1 - Domain Effects and Financial Risk Attitudes

AU - Vlaev, Ivo

AU - Kusev, Petko

AU - Stewart, Neil

AU - Aldrovandi, Silvio

AU - Chater, Nick

N1 - © 2010 Society for Risk Analysis.

PY - 2010/9/14

Y1 - 2010/9/14

N2 - 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.

AB - 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.

KW - financial risk

KW - framing effects

KW - risk attitudes

KW - risk perception

U2 - 10.1111/j.1539-6924.2010.01433.x

DO - 10.1111/j.1539-6924.2010.01433.x

M3 - Article

VL - 30

SP - 1374

EP - 1386

JO - Risk Analysis

T2 - Risk Analysis

JF - Risk Analysis

SN - 0272-4332

IS - 9

ER -