Evaluating Risk Propensity Using an Objective Instrument

Abstract

Risk propensity is the stable tendency to choose options with a lower probability of success, but greater rewards. Its evaluation has been approached from various perspectives: from self-report questionnaires to objective tests. Self-report questionnaires have often been criticized due to interference from voluntary and involuntary biases, in addition to their lack of predictive value. Objective tests, on the other hand, require resources that make them difficult to administer to large samples. This paper presents an easy-to-administer, 30-item risk propensity test. Each item is itself an objective test describing a hypothetical situation in which the subject must choose between three options, each with a different gain function but equivalent in expected value. To assess its psychometric fit, the questionnaire was administered to 222 subjects, and we performed a test of its reliability as well as exploratory factor analysis. The results supported a three-factor model of risk (Sports and Gambling, Long-term Plans, and Loss Management). After making the necessary adjustments and incorporating a global factor of risk propensity, confirmatory factor analysis was done, revealing that the data exhibited adequate goodness of fit.