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

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

Sequence effects in categorization of simple perceptual stimuli

Categorization research typically assumes that the cognitive system has access to a (more or less noisy) representation of the absolute magnitudes of the properties of stimuli and that this information is used in reaching a categorization decision. However, research on identification of simple perceptual stimuli suggests that people have very poor representations of absolute magnitude information and that judgments about absolute magnitude are strongly influenced by preceding material. The experiments presented here investigate such sequence effects in categorization tasks. Strong sequence effects were found. Classification of a borderline stimulus was more accurate when preceded by a distant member of the opposite category than by a distant member of the same category. It is argued that this category contrast effect cannot be accounted for by extant exemplar or decision-bound models of categorization. The effect suggests the use of relative magnitude information in categorization. A memory and contrast model illustrates how relative magnitude information may be used in categorization

Universal generalization and universal inter-item confusability

We argue that confusability between items should be distinguished from generalization between items. Shepard's data concern confusability, but the theories proposed by Shepard and by Tenenbaum & Griffiths concern generalization, indicating a gap between theory and data. We consider the empirical and theoretical work involved in bridging this gap

Associations between a one-shot delay discounting measure and age, income, education and real-world impulsive behavior

There has been discussion over the extent to which delay discounting – as prototypically shown by a preference for a smaller-sooner sum of money over a larger-later sum – measures the same kind of impulsive preferences that drive non-financial behavior. To address this issue, a dataset was analyzed containing 42,863 participants’ responses to a single delay-discounting choice, along with self-report behaviors that can be considered as impulsive. Choice of a smaller-sooner sum was associated with several demographics: younger age, lower income, and lower education; and impulsive behaviors: earlier age of first sexual activity and recent relationship infidelity, smoking, and higher body mass index. These findings suggest that at least an aspect of delay discounting preference is associated with a general trait influencing other forms of impulsivity, and therefore that high delay discounting is another form of impulsive behavior

Are probabilities overweighted or underweighted when rare outcomes are experienced (rarely)?

When making decisions involving risky outcomes on the basis of verbal descriptions of the outcomes and their associated probabilities, people behave as if they overweight small probabilities. In contrast, when the same outcomes are instead experienced in a series of samples, people behave as if they underweight small probabilities. We present two experiments showing that the existing explanations of the underweighting observed in decisions from experience are not sufficient to account for the effect. Underweighting was observed when participants experienced representative samples of events, so it cannot be attributed to undersampling of the small probabilities. In addition, earlier samples predicted decisions just as well as later samples did, so underweighting cannot be attributed to recency weighting. Finally, frequency judgments were accurate, so underweighting cannot be attributed to judgment error. Furthermore, we show that the underweighting of small probabilities is also reflected in the best-fitting parameter values obtained when prospect theory, the dominant model of risky choice, is applied to the data

Socialisation and the work-related norms of marketing practitioners

This paper empirically describes the influences of professional and organisational socialisation on the norms of marketers. Based on a survey of 5,000 practitioners, it finds that the socialisation of marketers into their profession and organisations positively influences their marketing-related norms. This research appears to be the first investigation in the marketing ethics literature of the relationships among these constructs. The paper explains how the learning of professional and organisational rules, guidelines, and values influence the work-related norms of marketers. The findings have important implications for marketing managers and managers of professional associations.<br /

How do experts think child poverty should be measured in the UK? An analysis of the Coalition Government’s consultation on child poverty measurement 2012-13

This paper examines responses to a 2012-13 government consultation on child poverty measurement. It explores what these responses tell us about attitudes towards the child poverty indicators in the Child Poverty Act 2010, and about the extent of support for a broader approach to measurement. The study was motivated by the amendments to the Child Poverty Act put forward by the Conservative Government in 2015. Using a Freedom of Information request, we gained access to 251 of the 257 consultation responses, which came from individuals and organisations with a wide range of expertise, including academics, local authorities, frontline services and children’s charities. Our analysis finds strong support for the original suite of measures and near universal support for keeping income at the heart of poverty measurement; poverty is understood primarily to be a relative lack of material resources, with income widely believed to be the best proxy measure. While there is considerable support for capturing information around other dimensions, these are generally seen as causes or consequences of poverty, or as broader life chance measures, not as measures of child poverty itself. The paper also considers the government’s published summary of the consultation responses, and discusses differences between the government’s interpretation and our own