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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

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.

Suggested Citation

  • Leuermann, Andrea & Roth, Benjamin, 2012. "Does good advice come cheap? - On the assessment of risk preferences in the lab and the field," Working Papers 0534, University of Heidelberg, Department of Economics.
  • Handle: RePEc:awi:wpaper:0534
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Kristoffer W. Eriksen & Ola Kvaløy & Miguel Luzuriaga, 2017. "Risk-taking on Behalf of Others," CESifo Working Paper Series 6378, CESifo Group Munich.
    2. Kvaløy, Ola & Eriksen, Kristoffer & Luzuriaga , Miguel, 2014. "Risk-taking with Other People’s Money," UiS Working Papers in Economics and Finance 2014/21, University of Stavanger.

    More about this item

    Keywords

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

    JEL classification:

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

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