Is Risk-Taking a Personality Trait?
New research from the University of Basel suggests an individual’s propensity to take risks remains stable over time, akin to the general Intelligence Quotient (IQ).
It is known that people differ considerably in their willingness to take risks and that an individual’s tendency to take risks can also vary across domains.
However, a new European study on over 1500 participants finds evidence that there is also a general factor of individual risk preference, which remains stable over time. The findings have been published in the journals Science Advances and Nature Human Behaviour.
Questions such as “should I invest my money or leave it in my savings account?”, or even decisions on “whether to have surgery or not,” are judgment decisions as they have consequences and involve risks.
Investigators wanted to determine the nature of the risk preference driving risk-related decisions. That is, does our risk preference depend on the context or is it largely consistent across situations?
Investigators from the Max Planck Institute for Human Development in Berlin and the University of Basel found that both are true.
For the study, the researchers assessed the risk preferences of 1,507 adults aged between 20 and 36 years, by using three distinct approaches: self-reports on hypothetical risk scenarios, experimental behavioral tests involving financial incentives, and information on actual risky activities in everyday life.
In total, participants completed 39 tests over the course of a day. To examine how stable the risk preference is over time, the researchers had 109 participants repeat the tests after six months. Previous studies on risk preference mostly used just one or only a few selected measurement instruments.
Investigators learned that a person’s risk profile remains relatively consistent over time.
“Our findings indicate that risk-taking propensity has a psychometric structure similar to that of psychological personality characteristics. Like the general factor of intelligence, there is also a general factor of risk preference,” said Dr. Renato Frey from the University of Basel and the Max Planck Institute for Human Development.
“In other words, your willingness to take risks may vary across different areas of your life, but it will always be affected by the underlying general factor of risk preference.”
Supporting this idea, the study’s findings show that individuals’ general factor of risk preference remains stable over time.
Researchers also discovered that the hypothetical scenarios and the reports on actual risk-taking behavior both painted a similar picture of an individual’s risk preference.
However, a rather different picture emerged from the experimental behavioral tests. A detailed analysis of these inconsistencies revealed that for different behaviors, test participants used different decision-making strategies.
The strategic approach for risk taking depended on the type of behavioral task; whether it presented risk in a context of a game, for example, or in a more abstract form.
“These results show that behavioral tests, which tend to be the preferred approach of economists, often give an inconsistent picture of people’s risk preferences that is difficult to explain with unified theories of risk behavior,” said Prof. Dr. Jörg Rieskamp from the University of Basel.
Investigators believe the study findings are important both methodologically as well as theoretically.
“Our work is a wake-up call for researchers, who need to think twice about the various measurement traditions. In particular, there needs to be a better understanding of what exactly the behavioral tasks measure. It seems clear that they don’t assess risk preference across situations,” said Prof. Dr. Ralph Hertwig from the Max Planck Institute for Human Development.
“But our finding of a general factor of risk preference — based on self-reports and frequency measures of actual risky activities — suggests that risk preference is a personality characteristic in its own right. This insight will make it possible to examine the biological underpinnings of risk preference in future studies.”
Source: University of Basel
Nauert PhD, R. (2018). Is Risk-Taking a Personality Trait?. Psych Central. Retrieved on April 4, 2020, from https://psychcentral.com/news/2017/10/31/is-risk-taking-a-personality-trait/128146.html