Are risk preferences consistent?: The influence of decision domain and personality

Abstract

This paper examines the consistency of risk preferences across three decision domains important in most people’s lives: work, health and personal finance. We consider the degree to which the five factor model of personality and a range of factors that influence risk-related decision-making (perceived risk, framing, emotions and cost–benefit analysis) impact upon cross-domain consistency. Data were gathered from a sample of participants for whom approaches to risk were likely to vary (academics, chess players, firefighters, mountaineers and City traders). The results showed that participants could be categorised into two groups: those who were consistent in their risk preferences in three decision domains, and those who were inconsistent or domain-specific. The consistent group was significantly lower on neuroticism and higher on agreeableness and conscientiousness with a less variable approach to weighing up the costs and benefits of taking risks than the inconsistent group. The majority of the consistent group was risk averse. When the domain-specific risk preferences of the inconsistent group were examined, data showed that different combinations of personality and decision-making factors predicted risk preferences within each domain.