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Stereotypes and false consensus: How financial professionals predict risk preferences

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  • Roth, Benjamin
  • Voskort, Andrea

Abstract

We analyze the prediction of risk preferences of others using an artefactual field experiment with financial professionals and students. For their prediction, the subjects receive information on multiple demographic characteristics and a self-assessment of risk taking of the target. When analyzing the predictions we find three significant effects: subjects use the demographic information for stereotyping as well as the target's self-assessment on risk taking, and we find a considerable false consensus effect. The false consensus effect is the strongest for experienced professionals. Regarding the prediction's accuracy, we find that the forecasts of the professionals are more accurate than the forecasts of the students.

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  • Roth, Benjamin & Voskort, Andrea, 2014. "Stereotypes and false consensus: How financial professionals predict risk preferences," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PB), pages 553-565.
    • Handle: RePEc:eee:jeborg:v:107:y:2014:i:pb:p:553-565
    DOI: 10.1016/j.jebo.2014.05.006
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    7. Utz Weitzel & Christoph Huber & Jürgen Huber & Michael Kirchler & Florian Lindner & Julia Rose & Lauren Cohen, 2020. "Bubbles and Financial Professionals," The Review of Financial Studies, Society for Financial Studies, vol. 33(6), pages 2659-2696.
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    17. Zhuoqiong (Charlie) Chen & Tobias Gesche, 2016. "Persistent bias in advice-giving," ECON - Working Papers 228, Department of Economics - University of Zurich, revised Oct 2017.
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    More about this item

    Keywords

    Risk preferences; Financial advice; Artefactual field experiment; Behavioral finance;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles

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