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Does good advice come cheap? - On the assessment of risk preferences in the lab and the field

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  • Leuermann, Andrea
  • Roth, Benjamin
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    Abstract

    Advice is important for decision making, especially in the financial sector. We investigate how individuals assess risk preferences of others given sociodemographic information or pictures. Both non-professionals and fi nancial professionals participate in this artefactual field experiment. Subjects mainly rely on the other's self-assessment of risk preferences and on gender when forming the belief about someone else's risk preferences. On average, subjects consider themselves to be more risk-tolerant than the person they evaluate. Subjects use their own risk attitude as a reference point for predicting others' risk preferences. This false consensus eff ect is less pronounced for young professionals than for senior and non-professionals. Furthermore, financial professionals predict risk preferences more accurately compared to non-professionals.

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    Bibliographic Info

    Paper provided by University of Heidelberg, Department of Economics in its series Working Papers with number 0534.

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    Date of creation: 03 Aug 2012
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    Handle: RePEc:awi:wpaper:0534

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    Related research

    Keywords: Risk Preferences; Financial Advice; Artefactual Field Experiment; Behavioral Finance;

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    2. M.C.J. van Rooij & Annamaria Lusardi & R. Alessie, 2007. "Financial Literacy and Stock Market Participation," Working Papers 07-23, Utrecht School of Economics.
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