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Individual Risk Attitudes: Measurement, Determinants and Behavioral Consequences

  • Dohmen Thomas
  • Falk Armin
  • Huffman David
  • Sunde Uwe
  • Schupp Jürgen
  • Wagner Gert

    (ROA rm)

This paper studies risk attitudes using a large representative survey and a complementaryexperiment conducted with a representative subject pool in subjects’ homes. Using aquestion asking people about their willingness to take risks “in general”, we find thatgender, age, height, and parental background have an economically significant impacton willingness to take risks. The experiment confirms the behavioral validity of thismeasure, using paid lottery choices. Turning to other question about risk attitudesin specific contexts, we find similar results on the determinants of risk attitudes, andalso shed light on the deeper question of stability of risk attitudes across contexts. Weconduct a horse race of the ability of different measures to explain risky behaviorssuch as holdings stocks, occupational choice, and smoking. The question about risktakingin general generates the best all-around predictor of risky behavior. (JEL codes:D0, D1, D80, D81, C91, C93, J16, J24, I1).

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Paper provided by Maastricht University, Research Centre for Education and the Labour Market (ROA) in its series ROA Research Memorandum with number 007.

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Date of creation: 2009
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Handle: RePEc:unm:umaror:2009006
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