Presentation of risk warning statement moderate the relationships between risk-taking traits, risk preference, and financial risk-taking behavior

Abstract

This research aimed to study the relationship between people’s risk-taking traits, risk preference, and financial risk-taking behavior in the situation where the risk warning statements existed. The study was based on an online experiment conducted in Thailand. The results were taken from 640 participants joining and contributing their answers to the tests. In the context of experimental design, each participant was randomly assigned to different groups in order to investigate the effect of risk warning statements on the relationships. The results suggested that there existed a relationship between risk-taking traits, risk preference, and financial risk-taking behavior such that high risk-taking traits were linked to a low degree of risk aversion and then caused high financial risk-taking behavior of the people. Given the presentation of the risk warning statements, there was no significant effect found on reducing the financial risk-taking behavior; however, an effect was found on risk preference for a strong version of the risk warning statement. In terms of measurements, additionally, the research also proposed an alternative measure of people’s risk preference based on the so-called Dollar Equivalence (DE) which was a tweaked concept of Probability Equivalence (PE). Regarding the results, the DE was proven to be a superior measure of risk preference compared with the PE.