Individual Risk Preferences Research Articles

Who is chronically obese in Indonesia? The role of individual preferences.

Numerous studies have confirmed the relationship between individual risk and time preference and obesity. Nevertheless, none has studied the effect of these attitudes on chronic (long-term) obesity. This study used Indonesia Family Life Survey (IFLS) data from 16,366 individuals. It tracked their obesity status in 2007 and 2014 by calculating body mass index, the ratio between body weight and square of height. Besides the conventional risk-averse and risk-tolerant behaviour, the IFLS sample includes people who fear uncertainty related to the status quo bias. The ordered logit regression results show that past impatience, risk tolerance, and status quo bias behaviour (in 2007) are associated with transient or chronic obesity, while only current behaviour of status quo bias (in 2014) is associated with obesity. Furthermore, our study confirms that chronic obesity in Indonesia is prevalent among highly educated, high-income, and urban-centric individuals, exacerbated by impatience, risk tolerance, and uncertainty aversion. Thus, providing information on the risk of obesity and food calories, giving the incentive to avoid obesity, and improving the quality of built environments such as public parks, public transportation, and footpath could help prevent the rising obesity prevalence.

Reduced neural encoding of utility prediction errors in cocaine addiction

Influential accounts of addiction posit alterations in adaptive behavior driven by deficient dopaminergic prediction errors (PEs), signaling the discrepancy between actual and expected reward. Dopamine neurons encode these error signals in subjective terms, calibrated by individual risk preferences, as "utility" PEs. It remains unclear, however, whether people with drug addiction have PE deficits or their computational source. Here, using an analogous task to prior single-unit studies with known expectancies, we show that fMRI-measured PEs similarly reflect utility PEs. Relative to control participants, people with chronic cocaine addiction demonstrate reduced utility PEs in the dopaminoceptive ventral striatum, with similar trends in orbitofrontal cortex. Dissecting this PE signal into its subcomponent terms attributed these reductions to weaker striatal responses to received reward/utility, whereas suppression of activity with reward expectation was unchanged. These findings support that addiction may fundamentally disrupt PE signaling and reveal an underappreciated role for perceived reward value in this mechanism.

The Effect of Individual Preferences on Precautionary Behaviors in Vaccine Taking, Saving, and Physical Activity

The COVID-19 pandemic has underscored the importance of how people react behaviorally to external threats. Precautionary behavioral responses to COVID-19 become apparent. In addition, individual risk and time preferences are related to economic behaviors under uncertainty and health-related behaviors. This study aims to determine whether and how time and risk choices influence precautionary behaviors in vaccine-taking, saving, and physical activity during the coronavirus lockdown. We conducted a cross-sectional study utilizing an online survey, which included a sample of 1016 individuals aged 18 to 60 residing and working in Shanghai. We use logistic regressions to estimate. We have three findings. First, risk-taking and future-oriented individuals are more likely to get vaccinated. Second, future-oriented ones are more inclined to exercise at home via digital media during the lockdown. Third, neither risk preference nor time preference is predictive of precautionary saving. This work aids the literature by documenting time and risk preferences influencing health-related behaviors and life well-being during the lockdown. The conclusions have practical implications from a policy perspective.

Repeated experience and consistent risk preferences

Economists have developed various methods to elicit risk preferences, which can help forecast decision-making in risky scenarios. However, risk elicitation can be complex, and there remain unresolved challenges. Our research demonstrates that repeated exposure to risk elicitation tasks, such as the Holt-Laury and Eckel-Grossman tasks, results in individuals making more consistent decisions with less noise. This suggests that measuring risk preferences after individuals have gained experience and learning can yield more consistent outcomes and provide a more accurate representation of individual risk preferences.

Beliefs and preferences as predictors of prophylactic adherence and lockdown compliance in South Africa

ABSTRACT Much of the research on behavioural preferences as predictors of compliance with regulations aimed at reducing the transmission of COVID-19 has focused on developed countries, with very little consideration of African countries. We conduct an online survey (n = 1503) considering beliefs, and individual and social preferences as predictors of compliance with prophylactic measures and lockdown regulations in South Africa. We use incentivized experimental measures of individual (risk and time) preferences and social preferences (cooperativeness and altruism). We also consider survey measures of risk tolerance, patience and trust. We find that beliefs about others’ behaviour are highly predictive of reported behaviour. We also find that greater patience and cooperativeness are predictive of high compliance with prophylactic measures and lockdown regulations. Encouragingly, respondents report higher compliance at higher lockdown levels, suggesting responsiveness of behaviour to the level of risk of infection.

Individual risk preference as a predictor of health behaviour: evidence from the use of condoms against HIV/AIDS in Ghana

BackgroundIt is evident that public health education interventions to promote the use of condoms against HIV infections in Ghana have yielded modest results. However, existing studies in the field of sexual and reproductive health in Ghana have failed to account for differences in risk preferences of individuals. This study fills the gap by investigating how individuals' risk preferences predict their behaviour toward using condoms against HIV in Ghana.MethodConceptually, the study followed the Grossman health capital theoretical model for risk preference and health behaviour nexus. Data were obtained from the most recent Ghana Living Standards Survey Round 7 (GLSS 7), conducted in 2017. Using data from GLSS 7, a probit regression model was estimated to show how the risk preferences of individuals that did not abstain from sex predicted their use of condoms against HIV. To ensure robustness, two scenarios of declared risk preferences were used to predict the use of condom behaviour against HIV.ResultsProbit regression estimation shows that the risk preferences of individuals that did not abstain from sex significantly predicted their use of condoms against HIV in Ghana. Even though the study found that the predicted probability of using a condom reduces among risk-averse individuals that do not abstain from sex, not using a condom against HIV was found to be worse among risk lovers.ConclusionThe study provides empirical evidence that public health education against HIV/AIDS in Ghana cannot continue to ignore the risk preference of individuals. The results of this study have immediate implications, first for a comprehensive and continuous measurement of risk preferences among Ghanaians in major household surveys going forward. At the moment, the latest round of the GLSS is just about the only household survey in Ghana that has attempted to collect some data on individual time and risk preferences using only hypothetical monetary rewards. Second is the immediate consideration of individual risk preferences in public health education campaigns against HIV/AIDS in Ghana.

Risk preference and entrepreneurial investment at the top of the wealth distribution

We present evidence on how individual risk preferences are related to entrepreneurial investment among the wealthy. To do so, we use novel survey data from the top of the wealth distribution, which have been fully integrated into the 2019 German Socio-economic Panel Study. The data include private wealth balance sheets, in particular the value of own private business assets, and a standard measure of risk tolerance. We find that wealthy individuals are more likely to be entrepreneurs and invest a larger share of their wealth in their own businesses when they are more willing to take risks. A comparison with less wealthy individuals reveals that these associations are stronger among the wealthy. Since the wealthy dominate aggregate risky investment, their extraordinarily high preference for risk and its link to entrepreneurial activity should be taken into account in theory development, empirical analysis, and the design of public policies influencing the riskiness of income and wealth such as progressive taxation.

LP(a): Structure, Genetics, Associated Cardiovascular Risk, and Emerging Therapeutics.

Lipoprotein(a) [Lp(a)] is a molecule bound to apolipoprotein(a) with some similarity to low-density lipoprotein cholesterol (LDL-C), which has been found to be a risk factor for cardiovascular disease (CVD). Lp(a) appears to induce inflammation, atherogenesis, and thrombosis. Approximately 20% of the world's population has increased Lp(a) levels, determined predominantly by genetics. Current clinical practices for the management of dyslipidemia are ineffective in lowering Lp(a) levels. Evolving RNA-based therapeutics, such as the antisense oligonucleotide pelacarsen and small interfering RNA olpasiran, have shown promising results in reducing Lp(a) levels. Phase III pivotal cardiovascular outcome trials [Lp(a)HORIZON and OCEAN(a)] are ongoing to evaluate their efficacy in secondary prevention of major cardiovascular events in patients with elevated Lp(a). The future of cardiovascular residual risk reduction may transition to a personalized approach where further lowering of either LDL-C, triglycerides, or Lp(a) is selected after high-intensity statin therapy based on the individual risk profile and preferences of each patient.

Economic policy uncertainty and stock market in G7 Countries: A panel threshold effect perspective.

Based on the literature, it is commonly understood that stock prices (SP) are influenced by economic policy uncertainty (PU), with a rise in PU typically having a negative impact on SP. However, the relationship between PU and SP may not always be linear due to the varying risk preferences of individuals. Risk preference theory posits that individuals respond differently to different levels of risk. Therefore, this study aims to investigate whether PU determines SP asymmetrically (i.e., in a non-linear manner) by considering risk preferences and addressing a gap in the literature. To answer this question, the study employs a panel threshold approach to examine the effect of PU on SP in the Group of Seven (G7) countries, namely Canada, France, Germany, Italy, Japan, UK, and the US. In contrast to previous research, this study finds evidence of an asymmetric effect of PU on SP in the G7 countries. Specifically, the panel threshold results reveal that the impact of increased PU on SP is positive up to a certain level (Threshold1), beyond which it becomes negative (Threshold2). These findings are in line with information asymmetry hypothesis, prospect theory, behavioural finance hypothesis, and market liquidity hypothesis and shed light on the asymmetric behaviour of SP in response to varying levels of PU. The implications of these findings are significant for understanding how to manage risks effectively in the financial markets.

Acute Pain and Development of Opioid Use Disorder: Patient Risk Factors.

Pharmacological therapy for acute pain carries the risk of opioid misuse, with opioid use disorder (OUD) reaching epidemic proportions worldwide in recent years. This narrative review covers the latest research on patient risk factors for opioid misuse in the treatment of acute pain. In particular, we emphasize newer findings and evidence-based strategies to reduce the prevalence of OUD. This narrative review captures a subset of recent advances in the field targeting the literature on patients' risk factors for OUD in the treatment for acute pain. Besides well-recognized risk factors such as younger age, male sex, lower socioeconomic status, White race, psychiatric comorbidities, and prior substance use, additional challenges such as COVID-19 further aggravated the opioid crisis due to associated stress, unemployment, loneliness, or depression. To reduce OUD, providers should evaluate both the individual patient's risk factors and preferences for adequate timing and dosing of opioid prescriptions. Short-term prescription should be considered and patients at-risk closely monitored. The integration of non-opioid analgesics and regional anesthesia to create multimodal, personalized analgesic plans is important. In the management of acute pain, routine prescription of long-acting opioids should be avoided, with implementation of a close monitoring and cessation plan.

OPTIMAL PORTFOLIO FORMATION ANALYSIS USING THE SINGLE INDEX MODEL DURING THE COVID-19 PANDEMIC: A Study on The LQ 45 Index on the Indonesian Stock Exchange (IDX)

This study aims to determine the optimal portfolio formation using the single index model method on LQ 45 Index stocks for the period from March 2020 to December 2021. The population in this study consists of all company shares included in the LQ 45 Index during the specified period, totaling 45 stocks. A sample of 36 companies was selected using a nonprobability sampling technique with a purposive sampling method. Data collection was carried out using documentation techniques, primarily focusing on collecting closing stock price data. The data analysis process involved collecting the closing stock price data and utilizing the single index model method to identify an optimal portfolio. The results of this study indicate that 18 company shares were included in the optimal portfolio. These companies are ADRO (7.46%), AKRA (14.51%), ANTM (7.97%), ASII (4.42%), BBNI (3.3%), BBTN (1.8%), BMRI (4.55%), CPIN (1.45%), ERAA (11.14%), EXCL (3.19%), INCO (8.55%), INKP (3.98%), ITMG (5.08%), JPFA (4.86%), JSMR (3.37%), KLBF (8.3%), TKIM (1.85%), and TOWR (4.23%). The expected return for the portfolio is 4.38% per month, with a portfolio risk borne by investors of 0.29% per month. The study suggests that constructing a portfolio with the identified stocks can yield favorable returns. However, it is crucial to regularly reassess and adjust portfolios due to changing market conditions and individual risk preferences. The implications highlight the benefits of using the single index model for portfolio formation. By considering the relationship between individual stocks and the LQ 45 Index, investors can make informed decisions to maximize returns while managing risk. These specific stocks can serve as a starting point for further research in portfolio management.

How to ask twenty questions and win: Machine learning tools for assessing preferences from small samples of willingness-to-pay prices

Subjective value has long been measured using binary choice experiments, yet responses like willingness-to-pay prices can be an effective and efficient way to assess individual differences risk preferences and value. Tony Marley’s work illustrated that dynamic, stochastic models permit meaningful inferences about cognition from process-level data on paradigms beyond binary choice, yet many of these models remain difficult to use because their likelihoods must be approximated from simulation. In this paper, we develop and test an approach that uses deep neural networks to estimate the parameters of otherwise-intractable behavioral models. Once trained, these networks allow for accurate and instantaneous parameter estimation. We compare different network architectures and show that they accurately recover true risk preferences related to utility, response caution, anchoring, and non-decision processes. To illustrate the usefulness of the approach, it was then applied to estimate model parameters for a large, demographically representative sample of U.S. participants who completed a 20-question pricing task — an estimation task that is not feasible with previous methods. The results illustrate the utility of machine-learning approaches for fitting cognitive and economic models, providing efficient methods for quantifying meaningful differences in risk preferences from sparse data.

Crypto Assets: A New Way of Diversifying Your Investments

International investments have gained momentum since the start of this century. Many investors in the developed economies invest in the growing economies to seek prospects of higher returns. This has become evident in the last two decades, especially after the financial crisis of 2008, when investors were forced to think outside of the box in order to get proper returns for their investments. Investing has become even more challenging when investors are faced with low and even negative yields, especially in the investments on short and medium term. This is where crypto assets come in the picture. Namely, with the appearance of the blockchain technology and all of the new opportunities it brings, crypto assets appeared as a new way for investors to diversify their investments and get higher returns. Though they bring additional choices to investors, they can also be very tricky and should be taken into consideration when investing with high cautiousness, simply because the technology they are based on is relatively new and not very much regulated, thus they bring higher risk than the traditional assets and fiat currencies that are already available. Having that in mind, this paper goes over the pricing, volatility and correlation of crypto assets with other currencies. Additionally, we look at the way they are regulated so far, how accessible is the market for them and their behavior vs the traditional fiat currencies. Lastly, we come to the conclusion that crypto assets, though being more volatile and riskier than fiat currencies, do in fact bring additional return to an investor’s portfolio and should be used carefully according to the individual risk and return preferences. There is still a lot to be examined and researched about crypto assets so that they can be better utilized in the future by investors.

Effects of haze pollution and institutional environment on demand for commercial health insurance.

What countermeasures should the public take as they become aware of the dangers of haze pollution? Insurance has the function of risk diversification, and little existing literature has focused on the relationship between haze pollution and commercial health insurance. This paper analyzes the impact of haze pollution on residents' demand for commercial health insurance and the heterogeneous impact of institutional environment using the 2017 China Household Finance Survey cross-sectional data (CHFS). The study finds that haze pollution raises residents' demand for commercial health insurance as their health risk perception level rises. The legal environment, market environment, and traditional culture affect the relationship between haze pollution and the demand for commercial health insurance. Further analysis reveals that the relationship between haze pollution and residents' demand for commercial health insurance can show significant regional heterogeneity, with a significant positive correlation in the eastern region and a significant negative correlation in the central and western regions. In addition, the preventive behaviors adopted by residents in the face of haze pollution can vary significantly depending on individual risk preferences. The findings of this paper are important for the public to take measures to cope with the haze pollution hazards. At the same time, insurance companies should improve their services to meet the needs of the public regarding haze pollution, which will contribute to the healthy development of the insurance industry.

Risk preference interactions between individual farmers and small farmer groups: Experimental evidence from rural Ethiopia

AbstractThe understanding of risk preference interactions among poor farmers in developing countries has important policy implications, as many programs that aim to alleviate poverty and address risk constraints are provided on a collective basis. We conduct a randomized field experiment in the drought‐prone parts of Northern Ethiopia and elicit from poor, vulnerable farmers their hypothetical willingness to pay using individual and group lottery games. Analyzing the certainty equivalent ratios (CERs), we find that farmer groups are more risk averse than individual farmers. When the risk of the lottery is high, the group CER is primarily determined by the most‐risk‐averse farmer of the group, and to a lesser extent, by the least. The median farmer contributes to the group CER only when the lottery risk is moderate. After participating in the group elicitation, individual farmers also become as risk averse as the group on average. Specifically, the median and the least‐risk‐averse farmers become significantly more risk averse while the most‐risk‐averse farmer is unaffected. Our results show that policymakers should carefully consider how social interactions in rural communities affect individual and group risk preference and whether social interactions also affect the participation and effectiveness of development programs.

Gender differences in competitiveness: Friends matter

We run an experiment with Danish school children (7-16 years old) to shed new light on gender differences in competitive behavior. Danish girls are not significantly less likely than boys to choose a competitive scheme when we control for individual performance, risk preferences, confidence, stereotypes, and interactions with the opposite gender. However, for the children who perform above average we find a gender gap of 11.8 percentage points. Our elicitation of the network of friends allows us to study the association between a child's and their friends’ competitiveness: for each (extra) friend that is competitive, girls choose to compete more often (+9.6 percentage points). The same is not true for boys. Finally, boys become better at making the correct decision with age, but girls avoid competition when they should choose it.

Culture and Institutions: Long-lasting effects of communism on risk and time preferences of individuals in Europe

Even three decades after the end of communism in Eastern Europe, there are still observable differences in financial risk and time preferences compared to Western Europe. Using data from two large-scale surveys – one including European countries (INTRA) and one for West and East Germany (SOEP) – we show that the causes of these differences are not the same: While differences in loss aversion and patience are most likely caused by deeply rooted cultural differences that date back even before communist times, other differences can be explained by experiences during the communist era and the transition processes that followed. These insights may also help to predict what differences are more likely to converge in the near future.

Air pollution and risk preference

We empirically investigate whether exposure to air pollution alters an individual's risk preference. We utilize South Korean individual-level panel data, which contains information on risk preferences, locations, and interview dates. By exploiting the within-individual variation in risk preference and exposure to air pollution on the interview day, we find that a higher level of air pollution is associated with a lower probability of having a risk-loving preference. We also find that the impact of air pollution on risk preference is mostly transitory and contemporary.

The effect of individualism on bank risk and bank Performance: An international study

Employing an international sample of banks spanning 2009 to 2018, this paper investigates the effect of individualism on bank risk. We find that individualism is negatively associated with bank risk. We then find that managers’ (individual) risk preference as internal corporate governance and bank regulation as external corporate governance exhibit a mediation effect in explaining the relationship between individualism and bank risk. We further test the effect of individualism on bank performance, including bank efficiency and profitability. Our baseline results remain valid after carefully considering various robustness tests and endogeneity concerns.

Trust-Based Decision-Making in the Health Context Discriminates Biological Risk Profiles in Type 1 Diabetes.

Theoretical accounts on social decision-making under uncertainty postulate that individual risk preferences are context dependent. Generalization of models of decision-making to dyadic interactions in the personal health context remain to be experimentally addressed. In economic utility-based models, interactive behavioral games provide a framework to investigate probabilistic learning of sequential reinforcement. Here, we model an economic trust game in the context of a chronic disease (Diabetes Type 1) which involves iterated daily decisions in complex social contexts. Ninety-one patients performed experimental trust games in both economic and health settings and were characterized by a multiple self-report set of questionnaires. We found that although our groups can correctly infer pay-off contingencies, they behave differently because patients with a biological profile of preserved glycemic control show adaptive choice behavior both in economic and health domains. On the other hand, patients with a biological profile of loss of glycemic control presented a contrasting behavior, showing non-adaptive choices on both contexts. These results provide a direct translation from neuroeconomics to decision-making in the health domain and biological risk profiles, in a behavioral setting that requires difficult and self-consequential decisions with health impact. Our findings also provide a contextual generalization of mechanisms underlying individual decision-making under uncertainty.