Relativistic financial decisions : context effects on retirement saving and investment risk preferences

We report a study of the effects the choice set on financial decision making related to retirement savings and risky investment. The participants were presented with either a full range of choice options or a limited subset of the feasible options. The choices of saving and risk are affected by the position of each option in the range of presented options. This result demonstrated that the range of the options offered as possible saving rates and levels of investment risk influences decisions about saving and risk. The study was conducted on a sample of working people, and we controlled whether the participants can financially afford in their real life the decisions taken in the test. In addition, various measures of risk aversion did not account for the risk taken in each condition. Surprisingly, only the simplest and most direct risk preference measure was a significant predictor of the responses within a particular choice set context, although the actual choices were still very much influenced by the range. Thus, the results reported here suggest that financial judgments and choices are relative, which corroborates, in an important practical domain, previous related work with abstract gambles and hypothetical risky investments

Dimensionality of risk perception : factors affecting consumer understanding and evaluation of financial risk

This article describes two studies of the factors affecting consumer understanding of financial risk. The first study investigated factors affecting people's perception and comprehension of information about the risks related to retirement investments. First, we asked respondents to list possible risk factors related to investment in a pension plan. Then we obtained ratings of different factors (e.g., the perceived level of knowledge about an investment) that could affect perception of the risk of financial products and retirement investment decisions. Finally, we asked the subjects to rate 11 different descriptions presenting risk information about the same financial product. The risk information framing that received highest rating presented risk as variation between minimum and maximum values with an average in between. The second study demonstrated the risk framing that received highest ranking also prompted more stable risk preferences over a 3-month testing period in comparison to standard measures of risk aversion. Thus, the second study corroborated the importance of the findings in the first study and also indicated that, although people can exhibit stable risk preferences if we ask them the right questions, these preferences were very specific to the risk domain

Risk preference discrepancy : a prospect relativity account of the discrepancy between risk preferences in laboratory gambles and real world investments

In this article, we presented evidence that people are more risk averse when investing in financial products in the real world than when they make risky choices between gambles in laboratory experiments. In order to provide an account for this discrepancy, we conducted experiments, which showed that the range of offered investment funds that vary in their riskreward characteristics had a significant effect on the distribution of hypothetical funds to those products. We also showed that people are able to use the context provided by the choice set in order the make relative riskiness judgments for investment products. This context dependent relativistic nature of risk preferences is proposed as a plausible explanation of the risk preference discrepancy between laboratory experiments and real-world investments. We also discuss other possible theoretical interpretations of the discrepancy

Using behavioral economics concepts to increase organizational learning in an NHS hospital

Purpose The purpose of this paper is to assess whether the dissemination systems that hospitals use to spread information about particular safety incidents can be enhanced using behavioural economics concepts. Design/methodology/approach The current service evaluation took place within eight wards in a single acute care hospital. It was conducted as a randomized controlled trial with two groups. In the control group nothing was altered. In the intervention group ward managers received additional support to disseminate information to their nurses. Nurses were randomly selected to be surveyed during their scheduled shifts. The surveys revealed how the nurses learned about particular safety incidents and how many they remembered. Findings Nurses in the intervention group were more likely to learn about particular safety incidents than nurses in the control group. Practical implications Enhancing common dissemination systems in hospitals can increase organizational learning about safety incidents. The current study presents some means by which dissemination systems can be enhanced. Originality/value The current service evaluation is a unique application of behavioural economics concepts to enhance organizational learning of particular adverse safety incidents in an NHS hospital

Context moderates priming effects on financial risk taking

Previous research has shown that risk preferences are sensitive to the financial domain in which they are framed. In the present paper, we explore whether the effect of negative priming on risk taking is moderated by financial context. A total of 120 participants completed questionnaires, where risky choices were framed in six different financial scenarios. Half of the participants were allocated to a negative priming condition. Negative priming reduced risk-seeking behaviour compared to a neutral condition. However, this effect was confined to non-experiential scenarios (i.e., gamble to win, possibility to lose), and not to ‘real world’ financial products (e.g., pension provision). The results call into question the generalisability of priming effects on different financial contexts

The bidirectional relationship between sense of purpose in life and physical activity : a longitudinal study

People with a greater sense of purpose in life may be more likely to engage in physical activity. At the same time, physical activity can contribute to a sense of purpose in life. The present research tests these hypotheses using a cross-lagged panel model in a nationally representative, longitudinal panel of American adults (N = 14,159, M  = 68). An increase in sense of purpose in life was associated with higher physical activity four years later, above and beyond past activity levels. Physical activity was positively associated with future levels of sense of purpose in life, controlling for prior levels of purpose in life. Results held in a second national panel from the US with a nine-year follow-up (N = 4,041, M  = 56). The findings demonstrate a bidirectional relationship between sense of purpose in life and physical activity in large samples of middle-aged and older adults tracked over time