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Can We Measure Individual Risk Attitudes in a Survey?

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Author Info

  • Ding, Xiaohao

    () (Peking University)

  • Hartog, Joop

    () (University of Amsterdam)

  • Sun, Yuze

    () (Peking University)

Abstract

We combine a survey and an experiment with real pay-out among Peking University students to measure and validate individual risk attitudes. The experiment involves choosing between a cash payment and playing a lottery. The survey questions ask for the reservation price of a hypothetical lottery and self-assessment of risk attitude on a 0-10 scale. We confirm familiar findings: risk aversion dominates, women are more risk averse than men, risk aversion decreases with increasing parental income, risk attitudes are domain-specific. Correlations between survey measures and experimental measures, are in the right direction, but not very high. The survey measures are valid indicators of experimentally measured risk attitude, but with substantial noise remaining. Heterogeneity in levels and structures of risk attitude is large.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4807.

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Length: 32 pages
Date of creation: Mar 2010
Date of revision:
Handle: RePEc:iza:izadps:dp4807

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Related research

Keywords: risk attitude; survey question; experimental validation;

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References

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  1. Diaz-Serrano, Luis & O'Neill, Donal, 2004. "The Relationship between Unemployment and Risk-Aversion," IZA Discussion Papers 1214, Institute for the Study of Labor (IZA).
  2. Cramer, J. S. & Hartog, J. & Jonker, N. & Van Praag, C. M., 2002. "Low risk aversion encourages the choice for entrepreneurship: an empirical test of a truism," Journal of Economic Behavior & Organization, Elsevier, vol. 48(1), pages 29-36, May.
  3. repec:feb:framed:0019 is not listed on IDEAS
  4. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde & Jürgen Schupp & Gert G. Wagner, 2005. "Individual Risk Attitudes: New Evidence from a Large, Representative, Experimentally-Validated Survey," Discussion Papers of DIW Berlin 511, DIW Berlin, German Institute for Economic Research.
  5. Monica Paiella & Luigi Guiso, 2004. "Risk Aversion, Wealth and Background Risk," 2004 Meeting Papers 525, Society for Economic Dynamics.
  6. Scott Fausti & Jeffrey Gillespie, 2006. "Measuring risk attitude of agricultural producers using a mail survey: how consistent are the methods?," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(2), pages 171-188, 06.
  7. Donkers, Bas & Melenberg, Bertrand & Van Soest, Arthur, 2001. " Estimating Risk Attitudes Using Lotteries: A Large Sample Approach," Journal of Risk and Uncertainty, Springer, vol. 22(2), pages 165-95, March.
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