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Can self-assessed financial risk measures explain and predict bank customers' objective financial risk?
KTH, School of Architecture and the Built Environment (ABE), Real Estate and Construction Management, Banking and Finance.ORCID iD: 0000-0001-7106-4827
2018 (English)In: Journal of Economic Behavior and Organization, ISSN 0167-2681, E-ISSN 1879-1751, Vol. April, p. 226-242Article in journal (Refereed) Published
Abstract [en]

This paper evaluates risk preference measures by contrasting subjective or self-assessed risk with objective risk, as implicated by bank customers’ actual portfolio allocation. Using a detailed data set of 7,234 bank customers, we find that subjective risk measures can explain and predict objective risk, but that the relationship is relatively weak. Subjective measures that uses survey questions about the customers’ trade-off between risk and return is a better measure than the hypothetical lottery for explaining objective risk. Both measures are relatively weak at predicting objective risk, but perform better than using a naïve model. We also find that multiple-item variables are somewhat better than single-item variables for explaining objective risk.

Place, publisher, year, edition, pages
Elsevier, 2018. Vol. April, p. 226-242
National Category
Economics and Business
Research subject
Business Studies
Identifiers
URN: urn:nbn:se:kth:diva-224621DOI: 10.1016/j.jebo.2018.02.018ISI: 000432506700014Scopus ID: 2-s2.0-85042768792OAI: oai:DiVA.org:kth-224621DiVA, id: diva2:1191796
Funder
The Jan Wallander and Tom Hedelius Foundation, 2015-0523
Note

QC 20180327

Available from: 2018-03-20 Created: 2018-03-20 Last updated: 2018-06-19Bibliographically approved

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Hermansson, Cecilia

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  • Other locale
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