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Stereotypes and false consensus: How financial professionals predict risk preferences

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  • Roth, Benjamin
  • Voskort, Andrea

Abstract

We analyze the prediction of risk preferences of others using an artefactual field experiment with financial professionals and students. For their prediction, the subjects receive information on multiple demographic characteristics and a self-assessment of risk taking of the target. When analyzing the predictions we find three significant effects: subjects use the demographic information for stereotyping as well as the target's self-assessment on risk taking, and we find a considerable false consensus effect. The false consensus effect is the strongest for experienced professionals. Regarding the prediction's accuracy, we find that the forecasts of the professionals are more accurate than the forecasts of the students.

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  • Roth, Benjamin & Voskort, Andrea, 2014. "Stereotypes and false consensus: How financial professionals predict risk preferences," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PB), pages 553-565.
    • Handle: RePEc:eee:jeborg:v:107:y:2014:i:pb:p:553-565
    DOI: 10.1016/j.jebo.2014.05.006
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    6. Madland, Kjetil Røiseland & Strømland, Eirik, 2022. "Fairness of the Crowd - An Experimental Study of Social Spillovers in Fairness Decisions," OSF Preprints tnv3g, Center for Open Science.
    7. Utz Weitzel & Christoph Huber & Jürgen Huber & Michael Kirchler & Florian Lindner & Julia Rose & Lauren Cohen, 2020. "Bubbles and Financial Professionals [Margin, short sell, and lotteries in experimental asset markets]," The Review of Financial Studies, Society for Financial Studies, vol. 33(6), pages 2659-2696.
    8. Bonaccorsi, Andrea & Apreda, Riccardo & Fantoni, Gualtiero, 2020. "Expert biases in technology foresight. Why they are a problem and how to mitigate them," Technological Forecasting and Social Change, Elsevier, vol. 151(C).
    9. Sean Fahle & Santiago I. Sautua, 2021. "How do risk attitudes affect pro-social behavior? Theory and experiment," Theory and Decision, Springer, vol. 91(1), pages 101-122, July.
    10. Roth, Benjamin & Trautmann, Stefan T. & Voskort, Andrea, 2016. "The role of personal interaction in the assessment of risk attitudes," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 63(C), pages 106-113.
    11. Felix Gottschalk, 2021. "Regulating Markets with Advice: An Experimental Study," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 83(1), pages 1-31, February.
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    13. Alger, Ingela & Van Leeuwen, Boris, 2019. "Estimating Social Preferences and Kantian Morality in Strategic Interactions," TSE Working Papers 19-1056, Toulouse School of Economics (TSE), revised Nov 2023.
    14. Sanjit Dhami & Ali al-Nowaihi & Cass R. Sunstein, 2019. "Heuristics and Public Policy: Decision-making Under Bounded Rationality," Studies in Microeconomics, , vol. 7(1), pages 7-58, June.
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    More about this item

    Keywords

    Risk preferences; Financial advice; Artefactual field experiment; Behavioral finance;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles

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