Personality and Risk Taking

Abstract

There is a long-standing and persistent belief that risk taking is a stable personality trait, often referred to as risk attitude. The belief implies that a given individual will take similar risks across a range of situations and that some people will be more risk-averse (or more risk-seeking) across situations than others. The article reviews different definitions of risk attitude that show cross-situational consistency to varying degrees. Risk attitude defined within the expected utility framework varies greatly across situations as a function of decision content and outcome framing. A different conceptualization of risk taking, within a risk–value framework, models risk taking as a function of (a) decision makers' perception of the riskiness and return of different courses of action, and (b) their attitude towards perceived risk, i.e., the risk–value tradeoff factor. When modeled within this framework, situational differences in risk taking tend to be the result of differences in the perception of risk in different situations rather than differences in willingness to take on (perceived) risk, thus restoring credibility to the notion of perceived-risk attitude(PRA) as a stable trait. Individual differences in PRA exist, but are smaller and less systematic than individual and group differences in risk perception. While the determinants of risk perception are relatively well known at this point not much is known about the determinants of PRA. Personality differences in variables known to be related to risk taking seem to have their effect via differences in risk perception.