The framing effect of negation frames

The current study explores the effect of negation frames on risky decision-making. Frames created with negation verbs, such as ‘not be saved’ rather than ‘die,’ are called negation frames. The results suggested that the effect of negation frames on decision-making is not significant. However, people tend to code negation frames differently. If negation frames are coded positively, people prefer a conservative option, whereas if negation frames are coded negatively, people prefer a risky option. Even in the same frame, this coding difference can result in decision-making differences. The findings of this study extend the meaning of the framing effect.     

Comparative optimism and risky road traffic behaviors among high‐risk sports practitioners

This study examines the relationship between participation in risky sports, comparative optimism (CO), and risky road traffic behaviors among a sample of adult men. We surveyed high‐risk (n = 313) and low‐risk (n = 53) sports practitioners, and non‐sportsmen (n = 89), assessing their CO, as well as their self‐reported risky behaviors and their accident experiences while driving a car. Results show that high‐risk sports practitioners expressed CO regarding the quality of their reflexes while driving and their vulnerability to traffic accidents. High‐risk sportsmen reported more risky behaviors while driving a car than the members of the other groups, and some of them, namely BASE‐jumpers, have experienced more traffic accidents. High‐risk sportsmen’s risky behaviors and accident experiences did not prevent them from expressing CO regarding their vulnerability to road accidents. Results are discussed, as well as putative psychological mechanisms underlying high‐risk sport practitioners’ CO and risky behaviors while driving.     

The Impact of Affective Reactions on Risky Decision Making in Accounting Contexts

In this study we examine whether managers' affective reactions influence their risk–taking tendencies in capital budgeting decisions. Prior research on risky decision making indicates that decision makers are often risk averse when choosing among alternatives that yield potential gains, and risk taking when the alternatives yield losses. The results reported here indicate that negative or positive affective reactions can change this commonly found risky behavior. Managers were generally risk avoiding (taking) for gains (losses) in the absence of affective reactions, as predicted by prospect theory. However, when affect was present, they tended to reject investment alternatives that elicited negative affect and accept alternatives that elicited positive affect, resulting in risk taking (avoiding) in gain (loss) contexts. The results also indicate that affective reactions can influence managers to choose alternatives with lower economic value, suggesting that managers consider both financial data and affective reactions when evaluating the utility of a decision alternative. These findings point to the importance of considering affective reactions when attempting to understand and predict risky decision making in accounting contexts.     

When time is (not) money: preliminary guidance on the interchangeability of time and money in laboratory-based risk research

The familiar adage that ‘time is money’ may not be entirely accurate according to research involving hypothetical choice: People’s decisions are less sensitive to temporal expenditures and outcomes than monetary ones. We provide a novel examination of whether similar patterns of risky choice are found for time and money when choices are consequential (i.e. monetary outcomes are obtained and temporal outcomes are experienced) – both for one-shot and repeated choices, over gains and losses. On the aggregate, across decision contexts (described and experienced), choices are similar for time and money. However, on the level of the individual, little relationship between risk preferences for time and money are observed. We discuss the theoretical and practical implications of these findings.     

基于计算实验金融方法的决策偏好比较研究

风险决策偏好表征着个体在面对不确定条件或具有风险时的决策态度,不同的偏好特征以效用函数为载体,外在地表现为个体具体所运用的投资策略。风险决策机制的深入理解以及基于不同决策偏好的策略比较分析对投资者的投资决策具有重要意义。通过运用计算实验金融方法对传统决策偏好以及前景理论进行多角度的比较分析,研究发现基于前景理论构造的投资策略相比传统决策偏好具有较大的优势,对于投资者本身来说是一个最佳的策略选择。     

Leveraged superannuation

Rules governing superannuation investments are made with respect to investment‐specific risks, rather than overall portfolio risks. In particular, legislation prohibits borrowing except in specific circumstances and on a non‐recourse basis. We model the distribution of leveraged portfolio outcomes for a representative investor, accounting for their age‐earnings profile, differing taxation of dividends, capital gains and franking credits, and the volatility of equity returns and interest rates. With explicit portfolio modelling, there is no need to categorize specific investments as ‘too risky’ on a stand‐alone basis. We show that leverage is likely to enhance retirement outcomes for investors with low risk aversion.     

The relationship between awareness of road safety measure and accident involvement in pre-drivers: the basis of a road safety programme

Objectives: This research aims to carry out a first validation of the QAR-Precon screening questionnaire applied in Catalonia during the drivers’ initial training, analyse the differences in risky road user behaviour according to two main variables: whether they had any experience of an accident and sex and examine the different risky road user patterns of pre-drivers. Methods: In order to group the questionnaire variables together, an exploratory factorial analysis (principal component analysis (PCA)) was used. Subsequently, the reliability coefficients of the questionnaire and the subscales were calculated. Lastly, ANOVA models were used to compare differences in the whole sample and a cluster analysis was performed to identify different risky pre-driver groups. Results: The factorial analysis (PCA) reveals the existence of five risk factors (speed and risk, external circumstances, distraction, alcohol and driving and other elements of driving) that explain 44.6% of the variance. More males than females reported that they had a higher tendency to take risks in all the risky factors exposed and injured pre-drivers reported less awareness of road safety than pre-drivers who had not been injured. A two-cluster solution indicated that it was possible to distinguish a group of pre-drivers who engaged in high risky behaviour (high group) from the group who engaged in moderate and low levels of risky road user behaviour (low group). Conclusions: The implications of these findings for programme designs and training initiatives to improve efficiency in reducing the accident rate are discussed.     

Sunk costs and sunk benefits: A re-examination of re-investment decisions

Prior experimental studies supporting the prospect theory explanation of the sunk-cost effect manipulate the framing of the initial investment, describing it either in neutral terms or as a prior loss. This paper subjects the prospect theory explanation to further examination, but takes an alternative experimental approach based on the differential risk taking behaviour predicted by prospect theory’s S-shaped value function. The experiments manipulate whether an initial investment produces a sunk cost (prior loss) or a sunk benefit (prior gain) and investigate the impact of this on the likelihood of authorising an incremental investment held constant across treatment conditions. To ensure the results are robust to the type of incremental investment, two experiments are conducted across which the outcomes of the incremental investment are manipulated to produce poor or good investment opportunities. In all cases the results fail to support a higher likelihood of authorising the incremental investment following a sunk cost than a sunk benefit. In isolation, therefore, prospect theory is unable to explain fully the sunk-cost effect.     

Genetic engineering,genetic modification,or agricultural biotechnology: does the term matter?

The risk perception and communication literature appears to use terms such as genetic engineering (GE), genetic modification (GM), and agricultural biotechnology (agbiotech) almost interchangeably. The present research therefore seeks to compare the effect of these three terms on consumers’ cognitive, affective and behavioral component of attitude. The variables under investigation are consumers’ perceptions of risk, benefits, personal control over technology, support and promotion of the development of technology, dread, labeling, and purchase intentions. The study draws on the equivalency framing literature in conducting two question wording experiments whereby participants are randomly assigned to receive a version that uses just one of the three different terms. The first experiment found that the framing effect of food technology as either GE or GM may be contingent on source of information. When the technology was framed as GE and the information source was a consumer organization, respondents reported higher perceived personal control over the technology compared to when the information source was government, newspaper, or no source. Therefore, framing food as GE may be a somewhat beneficial for those who seek to promote the technology while framing the technology as GM might help those who oppose the technology. The second experiment found that using the terms agbiotech and GE were associated with higher perceived benefits, positive feelings, and purchase intention compared to GM. The ‘agbiotech’ term garnered the most relative support for the technology. Implications are discussed.     

Quantifying the risk-sharing welfare gains of social security

The welfare effects of intergenerational risk sharing through a pay-as-you-go social security system that is efficiently indexed to wages or interest rates are quantified. Comparing steady states, there are large welfare gains of being born into an economy with efficient risk sharing as compared to the current U.S. system. Efficient policy involves an increasingly risky net of tax income over the life cycle. When adjustment to steady state is taken into account, the welfare gains largely turn negative. The results are also compared and contrasted to the first best allocation.     

Time to wealth goals in capital accumulation

This paper considers the problem of investment of capital in risky assets in a dynamic capital market in continuous time. The model controls risk, and in particular the risk associated with errors in the estimation of asset returns. The framework for investment risk is a geometric Brownian motion model for asset prices, with random rates of return. The information filtration process and the capital allocation decisions are considered separately. The filtration is based on a Bayesian model for asset prices, and an (empirical) Bayes estimator for current price dynamics is developed from the price history. Given the conditional price dynamics, investors allocate wealth to achieve their financial goals efficiently over time. The price updating and wealth reallocations occur when control limits on the wealth process are attained. A Bayesian fractional Kelly strategy is optimal at each rebalancing, assuming that the risky assets are jointly lognormal distributed. The strategy minimizes the expected time to the upper wealth limit while maintaining a high probability of reaching that goal before falling to a lower wealth limit. The fractional Kelly strategy is a blend of the log-optimal portfolio and cash and is equivalently represented by a negative power utility function, under the multivariate lognormal distribution assumption. By rebalancing when control limits are reached, the wealth goals approach provides greater control over downside risk and upside growth. The wealth goals approach with random rebalancing times is compared to the expected utility approach with fixed rebalancing times in an asset allocation problem involving stocks, bonds, and cash.     

Mobility,risk tolerance and competence to manage risks

Migration is a risky behaviour because of the uncertainty about future wages, living conditions, changing relationships with family and friends and cultural adjustment. While there has been some research on risk and uncertainty in migration, this has mostly been approached as a form of ‘rational’ decision-making: such approaches explain why some groups of individuals are more likely than others to migrate, but are limited in explaining individual variations in behaviour within these groups. Individual migrants vs. non-migrants are self-selected in terms of tolerance of risk and uncertainty but, with very few exceptions, there has been no research on migration within the framework of risk tolerance/aversion and competence to manage risk. Moreover, existing research is based on, and constrained by the limitations of, incumbent data-sets. Drawing on a specially commissioned large-scale survey of the UK population, this paper uses principal component analysis and logistic regression to analyse the extent to which risk and risk-related measures can be used to predict four different types of mobility profiles. There are significant associations between these individual mobility characteristics and general risk/uncertainty tolerance, and competence-based tolerance. These are strongest in terms of the two most polarised mobility types: the least mobile, the Stayers, and the most mobile, the Roamers. Recognising that previous migration is exogenous, a further analysis of migration intentions, with previous migration included as an independent variable, finds the propensity for future migration is, in fact, negatively associated with previous migration, probably due to the importance of ‘pure risk’ as opposed to acquired competence via migration experience, and to life cycle considerations.     

Variance Vulnerability, Background Risks, and Mean-Variance Preferences

An agent with two-parameter, mean-variance preferences is called variance vulnerable if an increase in the variance of an exogenous, independent background risk induces the agent to choose a lower level of risky activities. Variance vulnerability resembles the notion of risk vulnerability in the expected utility (EU) framework. First, we characterize variance vulnerability in terms of two-parameter utility functions. Second, we identify the multivariate normal as the only distribution such that EU- and two-parameter approach are compatible when independent background risks prevail. Third, presupposing normality, we show that—analogously to risk vulnerability—temperance is a necessary, and standardness and convex risk aversion are sufficient conditions for variance vulnerability.     

Risk-taking and performance of government bond mutual funds

This paper investigates the risk exposures of government bond mutual funds and how risk-taking behavior affects fund performance. Government bond mutual funds often outperform their respective benchmark bond indexes before but not after adjusting for bond market risk factors. We show that the risk-taking behavior of fund managers helps to explain the different performances of government bond funds with and without controlling for the risk factors. Our results suggest that risk-taking leads to higher returns relative to benchmarks in normal risk periods but lower returns in high risk periods, suggesting that fund managers consistently take risky bets in fund management. We further show that the risk-taking of government bond funds is persistent and that investors typically have no ability to differentiate between the skill and risk components of fund performance. These findings suggest why fund managers have incentives to take consistently risky positions.     

Interaction of individual framing and political orientation in guiding climate change risk perception

There is a general agreement that climate change is a potential hazard threatening the global village. An appropriate level of risk perception should be a critical issue in coping with the global environmental risk. We examined the determinants of the level of climate change risk perception. In particular, we examined if individual framing of climate change interacts with political orientation in guiding climate change risk perception. The main effect of the two factors was also investigated. A nationwide online survey (N = 592) was conducted in South Korea by a professional survey agent. When self-efficacy, trust, and other demographics were controlled for, multiple regression analyses revealed that those focusing on what is happening (diagnostic framing) rather than what-to-do (prognostic framing) had higher risk perception. More importantly, only conservatives showed significantly different levels of risk perception according to their framing of the issue. Conservatives inclined to diagnostic framing showed higher risk perception than conservatives favoring prognostic framing. This difference disappeared when it comes to South Korean liberals, indicating an interaction between individual framing and political orientation. The significance of investigating individual framing, not media framing, and their interaction with political orientation are discussed.     

An analysis of reported driver behaviour in samples of domestic and expatriate Iranians

Objective: Few studies have examined the differences in self-reported driver behaviour between drivers of one nationality who live in their country of origin (domestic drivers) and those who live abroad (expatriate drivers). This study aimed to explore the differences in self-reported driver behaviour among domestic and expatriate Iranian drivers. In addition, we explore the factors associated with self-reported accident involvement including personal injuries in these groups. Methods: A web-based version of the Driver Behaviour Questionnaire (DBQ) measuring self-reported driver errors and violations was distributed to respondents by availability sampling in social networks and by bulk email services. About 1000 individuals living in all provinces in Iran were invited to participate in the survey. We also invited Iranians living in more than 20 countries. A total of 634 domestic Iranians and 135 expatriate Iranians responded to our enquiry. The measure of driving behaviour asked the respondents about violations and error conduct during the last two years on any kind of road. The sample of domestic and expatriate drivers did not differ significantly in gender, age, education and driving hours per day. Domestic drivers were more likely to have experienced an accident in their lifetime. Both samples were relatively young of age (Domestic M integer?=?28.53, SD?=?6.85; Expatriate M integer?=?29.21, SD?=?7.71). Results: The results suggested that emotional violations were more common among the drivers living in Iran. Emotional violations and driver errors were related to self-reported accident involvement among domestic drivers while ordinary rule violations were associated with such accidents in the expatriate group. Conclusions: Iranian expatriate drivers reported less emotional violations than domestic drivers. A potential reason is that road traffic infrastructure and regulation enforcement in high-income developed countries do not facilitate emotional violations. Implications for road traffic safety and methodological limitations of the study are discussed.     

Risk assessment and risk decision-making process related to hazardous installation in France

The chemical process industry gathers critical infrastructures since chemical plants represent for the society both an instrument to generate activity and benefits (production of goods, employment, services …), and an instrument that can harm people and the environment. This paper describes the risk assessment approach need in France for licensing hazardous installations, in particular those covered by the Seveso II Directive and the implication for land-use planning. The first part explains why the French risk assessment procedure is based on the quantitative evaluation of major accident scenarios with explicit criteria, and only on qualitative analysis of the risk reducing measures without explicit criteria. The second part shows some on-going evolutions in the risk assessment process in particular for the analysis of the safety barriers. In the third part, the authors share some thoughts on the risk decision-making process.     

框架效应与贷款决策:一项金融素养的实验研究

过度借贷是一个常见的非理性决策。近年来,网络借贷市场的激烈竞争降低了申请贷款门槛,导致金融素养较低的人群开始参与网络借贷,进一步加剧了过度借贷现象。本文采用实验室实验方法,给被试者提供本质上完全等价的贷款产品,同时外生地变化贷款成本形式(绝对数值形式的利息相比于百分数形式的利率、单期利率相比于多期复利),研究贷款成本的展示形式对贷款意愿是否存在影响。结果表明,相比于月利率,展示月利息使得被试者的贷款接受率显著上升21.3个百分点;相比于年化复利,展示月利率使得被试者的贷款接受率显著上升7.91个百分点。这两种框架效应可分别由金融素养的知识层面和思维层面所解释。本文对网络小额贷款场景下的过度借贷提出了一种新的解释——贷款成本的框架效应,并采用实验经济学方法对此提供了可靠的证据。本文研究结论提示,加强金融教育和制定相关法规双措并举,有助于人们做出更审慎的贷款决策。     

The link between personality,aggressive driving,and risky driving outcomes – testing a theoretical model

This study tested a theoretical model of the relationship between the Big Five Personality Factors, aggressive driving and ‘risky driving outcomes’ (accidents, traffic tickets, and license suspension). It also tested the mediation effect of aggressive driving in the relationship between the five factor personality model and risky driving outcomes. Structural equation modeling was used to analyze the 293 participants’ responses. Bivariate correlations showed that aggressive driving was negatively related to emotional stability, agreeableness, and conscientiousness and positively related to risky driving outcomes. Agreeableness was negatively related to accidents, tickets, and license suspension. Conscientiousness was negatively related to tickets. The structural model was supported by data in which agreeableness predicted risky driving outcomes. Emotional stability, agreeableness, and conscientiousness predicted aggressive driving, which in turn predicted risky driving outcomes. Aggressive driving was shown to be a mediator in the relationship between agreeableness and risky driving outcomes.     

Systematic Risk and Empirical Research

We show here that risky asset returns generating processes stated in terms of factors which include both accounting and non-accounting based measures of risk (e.g. book to market ratios) imply, under fairly standard regularity conditions, that the Sharpe-Lintner-Black asset pricing model beta is a 'sufficient' statistic in the sense that it captures all important attributes of the returns generating process in a single number. We then derive the parametric relationship between betas based on inefficient index portfolios and betas based on the market or tangency portfolio. We demonstrate that the relationship between risky asset expected returns and betas computed on the basis of inefficient index portfolios is both consistent with the predictions of the Capital Asset Pricing Model and the multi-factor asset pricing models of Fama and French (1992, 1993, 1995 and 1996). The 'trick' is to realise that inefficient index portfolios are composed of the market portfolio and a collection of inefficient but self financing 'kernel' or 'arbitrage' portfolios. It then follows that there is a perfect linear cross sectional relationship between risky asset expected returns, betas based on inefficient index portfolios and the arbitrage portfolios. Hence, if we happen to stumble across variables that span the same subspace as the vectors representing the arbitrage portfolios, it is easy to create the illusion that risky asset expected returns depend on variables other than 'beta'.