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On the linkage between financial risk tolerance and risk aversion

Faff, Robert and Mulino, D and Chai, D (2008) On the linkage between financial risk tolerance and risk aversion. Journal of Financial Research, 31 (1). pp. 1-23. ISSN 0270-2592

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Abstract

We explore the linkage between financial risk tolerance (FRT) and risk aversion. To do this, we obtain FRT scores from a psychometrically validated survey and conduct a battery of online lottery choice experiments involving the same nonstudent participants. We contrast: real and hypothetical payoffs, low and high stakes, decisions involving gains and losses, and order effects. Our key finding is that the two approaches to analyzing decision making under uncertainty are strongly aligned. We present evidence that this is particularly the case for the female participants in our sample and when high-stake gambles are employed.

Item type:Article
ID code:41061
Keywords:linkage, financial risk , tolerance , risk aversion, FRT, online lottery choice experiments , high-stake gambles , Accounting, Finance, Accounting
Subjects:Social Sciences > Commerce > Accounting
Department:Strathclyde Business School > Accounting and Finance
Depositing user: Pure Administrator
Date deposited:10 Sep 2012 14:40
Last modified:31 May 2019 02:28
URI:https://strathprints.strath.ac.uk/id/eprint/41061
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