Development and Validation of a Model and Measure of Financial Risk-Taking

Journal of Behavioral Finance, Vol. 6, No. 3, pp. 129-143, 2005

Posted: 12 Jan 2012

See all articles by Niklas Lampenius

Niklas Lampenius

University of Hohenheim - Faculty of Business, Economics and Social Sciences

Michael J. Zickar

Bowling Green State University

Date Written: January 12, 2005

Abstract

This study presents a theoretical model and assessment tool that measures individual differences in risk-aversion in financial matters. Unlike other measures of financial risk-taking, this measure assumes no prior technical knowledge of finance. The assessment tool was developed using item response theory as well as classical test theory methods. The measure is tested for predictive validity through various procedures and proves to have those properties. In addition the measure is tested for construct validity using structural equation modeling and allows for the successful classification of individuals in one of four classifications: Non-Investor, Risk Managing Investor, Conservative Investor, and Speculator. We discuss potential applications of this measure.

Keywords: financial risk-taking, behavioral finance, IRT, SEM, RISK-taking, Psychology

Suggested Citation

Lampenius, Niklas and Zickar, Michael J., Development and Validation of a Model and Measure of Financial Risk-Taking (January 12, 2005). Journal of Behavioral Finance, Vol. 6, No. 3, pp. 129-143, 2005, Available at SSRN: https://ssrn.com/abstract=1983211

Niklas Lampenius (Contact Author)

University of Hohenheim - Faculty of Business, Economics and Social Sciences ( email )

Stuttgart, 70593
Germany

Michael J. Zickar

Bowling Green State University ( email )

Department of Psychology
Bowling Green, OH 43403
United States

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