Estimating Risky Behavior with Multiple-Item Risk Measures

66 Pages Posted: 26 Sep 2016 Last revised: 27 Feb 2017

See all articles by Lukas Menkhoff

Lukas Menkhoff

German Institute for Economic Research (DIW Berlin); Humboldt University of Berlin - Faculty of Economics

Sahra Sakha

Deutsche Bundesbank; German Institute of Economic Research

Date Written: February 2017

Abstract

We compare seven established risk elicitation methods and investigate how they robustly explain eleven kinds of risky behavior with 760 individuals. Risk measures are positively correlated; however, their performance in explaining behavior is heterogeneous and, therefore, difficult to assess ex ante. To close this knowledge gap, greater diversification across risk measures is helpful. We do, indeed, find that performance increases considerably if single-item risk measures are combined to form multiple-item risk measures. They tend to improve results the more single-item measures they contain and if these single-item risk measures have different framings. Interestingly, survey items perform as well as incentivized experimental items in explaining risky behavior.

Keywords: risk, experiments, household survey, testing methods, contexts

JEL Classification: D81, C93, O12

Suggested Citation

Menkhoff, Lukas and Sakha, Sahra, Estimating Risky Behavior with Multiple-Item Risk Measures (February 2017). DIW Berlin Discussion Paper No. 1608. Available at SSRN: https://ssrn.com/abstract=2843437 or http://dx.doi.org/10.2139/ssrn.2843437

Lukas Menkhoff (Contact Author)

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstra├če 58
Berlin, 10117
Germany

Humboldt University of Berlin - Faculty of Economics ( email )

Spandauer Strasse 1
Berlin
Germany

Sahra Sakha

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Strasse 14
Frankfurt/Main D-60431
Germany

German Institute of Economic Research ( email )

Mohrenstra├če 58
Berlin, 10117
Germany

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