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Survey-based measures of risk attitudes and portfolio risk: Evidence from pension participants

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  • Kuzubaş, Tolga U.
  • Saltoğlu, Burak

Abstract

We use a unique dataset of pension participants in Turkey to evaluate the effectiveness of a risk questionnaire developed by the regulatory authority. Our analysis includes a reliability assessment (Cronbach’s α=0.73) and a factor analysis that reveals two latent constructs: risk attitude and financial situation/literacy. Although both factors show a significant positive relationship with participants’ portfolio risk, the overall explanatory power remains low, with an R2 of 0.134. Comparing these factors in terms of their contribution to predictive validity, we demonstrate that the risk attitude factor—formed from questions directly addressing financial risk-taking—exhibits significantly greater predictive power than the financial situation/literacy factor, which pertains to questions about the financial situation and self-assessed financial literacy. Our results imply that demographic factors like gender, education level, marital status, and age show weak predictive power for portfolio risk, suggesting that observed behavior in risky choices is more influenced by domain-specific attitudes.

Suggested Citation

  • Kuzubaş, Tolga U. & Saltoğlu, Burak, 2024. "Survey-based measures of risk attitudes and portfolio risk: Evidence from pension participants," Journal of Behavioral and Experimental Finance, Elsevier, vol. 43(C).
    • Handle: RePEc:eee:beexfi:v:43:y:2024:i:c:s2214635024000881
    DOI: 10.1016/j.jbef.2024.100973
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    More about this item

    Keywords

    Risk attitudes; Pension fund; Portfolio risk;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G40 - Financial Economics - - Behavioral Finance - - - General

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