Abstract:

Risk taking behavior has great influence on the decision making process of individuals. In this respect, the methodology used in assessing individuals’ risk tolerance becomes an important issue. However, there is lack of unique and commonly used risk tolerance measure in literature. There are mainly two different approaches in measuring risk tolerance in literature; lottery versus financial risk assessment technique (FRT). The purpose of this study is to investigate whether measurement techniques differ with different decision frames (choosing lotteries as gambling decision frame and choosing portfolio etc. as investment decision). The results show that these two different risk assessment instruments differ when measured through using lottery versus investment questions (individuals tend to be more risk tolerant when they make investment decisions). However, two different financial risk assessment instruments fall into the same line.

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