Speaker: Jorgo Goossens
Title: Are risk preferences stable for impactful financial decisions?
Abstract: Numerous methods to elicit people’s risk preferences have evolved and evidence suggests that risk preferences may vary considerably when measured with different methods. We test this “risk elicitation puzzle” amongst 1600 pension fund members for which the stakes are large and their decisions are impactful. Based on a within-subject design using three well-known risk preference elicitation methods tailored to the pension domain, we find that the different methods give rise to varying estimates of risk preferences at the individual and aggregate level. We perform an in-depth comparison of the three risk elicitation tasks using simulation exercises. The observed heterogeneity in risk preference estimates across elicitation methods is similar to the heterogeneity arising from independent random draws from the choice distributions in the experiment. Observed risk preference instability across methods is more prevalent for individuals that are older, blue-collar workers, and lower income earners.
Co-author: Marike Knoef