Eliciting risk preferences experimentally versus using a general risk question. Does financial literacy bridge the gap?
| dc.contributor.author | Mudzingiri, Calvin | |
| dc.contributor.author | Koumba, Ur | |
| dc.date.accessioned | 2021-07-28T06:55:11Z | |
| dc.date.available | 2021-07-28T06:55:11Z | |
| dc.date.issued | 2021 | |
| dc.description.abstract | The study investigates the stability of financial risk preference choices elicited from subjects by way of two methods, namely: experimentally elicited incentivized revealed risk preferences (IRRP) and (self-reported) perceived willingness to take a financial risk (PWTFR). The research further examines whether financial literacy (a human capital aspect) helps in reducing the gap between IRRP and PWTFR choices made by subjects. A total of 193 university students (where 53% were female) participated in the study. The subjects completed IRRP choices from four multiple price list (MPL) risk preference tasks and a financial literacy questionnaire. There is a tendency to anchor at extremes of risk-seeking behavior when subjects self-report their PWTFR choices. A paired t-test analysis of the two methods shows that the average responses from the two methods are significantly different. A random effect (RE) panel regression shows that an increase in financial literacy narrows the gap between IRRP and PWTFR choices. The study’s findings show that responses by subjects from a PWTFR general risk question (GRQ) and IRRP experiment are unstable and inconsistent. What people say in a survey does not always translate into what they do when faced with a risk preference choice dilemma. Financial literacy helps individuals to predict their risk attitudes more precisely. | en_ZA |
| dc.description.version | Publisher's version | en_ZA |
| dc.identifier | https://doi.org/10.3390/risks9080140 | |
| dc.identifier.citation | Mudzingiri, C., & Koumba, U. (2021). Eliciting risk preferences experimentally versus using a general risk question. Does financial literacy bridge the gap? Risks, 9: 140. https://doi.org/10.3390/risks9080140 | en_ZA |
| dc.identifier.issn | 2227-9091 (online) | |
| dc.identifier.uri | http://hdl.handle.net/11660/11234 | |
| dc.language.iso | en | en_ZA |
| dc.publisher | MDPI | en_ZA |
| dc.rights.holder | Author(s) | en_ZA |
| dc.subject | Incentivized revealed risk preferences | en_ZA |
| dc.subject | Perceived financial risk | en_ZA |
| dc.subject | General risk question | en_ZA |
| dc.subject | Risk tolerance gap | en_ZA |
| dc.subject | Financial literacy | en_ZA |
| dc.subject | Theory comparison approach | en_ZA |
| dc.title | Eliciting risk preferences experimentally versus using a general risk question. Does financial literacy bridge the gap? | en_ZA |
| dc.type | Article | en_ZA |