The lottery-panel task for bi-dimensional parameter-free elicitation of risk attitudes

We propose first, a simple task for the eliciting attitudes toward risky choice, the SGG lottery-panel task, which consists in a series of lotteries constructed to compensate riskier options with higher risk-return trade-offs. Using Principal Component Analysis technique, we show that the SGG lottery-panel task is capable of capturing two dimensions of individual risky decision making i.e. subjects’ average risk taking and their sensitivity towards variations in risk-return. From the results of a large experimental dataset, we confirm that the task systematically captures a number of regularities such as: A tendency to risk averse behavior (only around 10% of choices are compatible with risk neutrality); An attraction to certain payoffs compared to low risk lotteries, compatible with over-(under-) weighting of small (large) probabilities predicted in PT and; Gender differences, i.e. males being consistently less risk averse than females but both genders being similarly responsive to the increases in risk-premium. Another interesting result is that in hypothetical choices most individuals increase their risk taking responding to the increase in return to risk, as predicted by PT, while across panels with real rewards we see even more changes, but opposite to the expected pattern of riskier choices for higher risk-returns. Therefore, we conclude from our data that an “economic anomaly” emerges in the real reward choices opposite to the hypothetical choices. These findings are in line with Camerer's (1995) view that although in many domains, paid subjects probably do exert extra mental effort which improves their performance, choice over money gambles is not likely to be a domain in which effort will improve adherence to rational axioms (p. 635). Finally, we demonstrate that both dimensions of risk attitudes, average risk taking and sensitivity towards variations in the return to risk, are desirable not only to describe behavior under risk but also to explain behavior in other contexts, as illustrated by an example. In the second study, we propose three additional treatments intended to elicit risk attitudes under high stakes and mixed outcome (gains and losses) lotteries. Using a dataset obtained from a hypothetical implementation of the tasks we show that the new treatments are able to capture both dimensions of risk attitudes. This new dataset allows us to describe several regularities, both at the aggregate and within-subjects level. We find that in every treatment over 70% of choices show some degree of risk aversion and only between 0.6% and 15.3% of individuals are consistently risk neutral within the same treatment. We also confirm the existence of gender differences in the degree of risk taking, that is, in all treatments females prefer safer lotteries compared to males. Regarding our second dimension of risk attitudes we observe, in all treatments, an increase in risk taking in response to risk premium increases. Treatment comparisons reveal other regularities, such as a lower degree of risk taking in large stake treatments compared to low stake treatments and a lower degree of risk taking when losses are incorporated into the large stake lotteries. Results that are compatible with previous findings in the literature, for stake size effects (e.g., Binswanger, 1980; Antoni Bosch-Domènech & Silvestre, 1999; Hogarth & Einhorn, 1990; Holt & Laury, 2002; Kachelmeier & Shehata, 1992; Kühberger et al., 1999; B. J. Weber & Chapman, 2005; Wik et al., 2007) and domain effect (e.g., Brooks and Zank, 2005, Schoemaker, 1990, Wik et al., 2007). Whereas for small stake treatments, we find that the effect of incorporating losses into the outcomes is not so clear. At the aggregate level an increase in risk taking is observed, but also more dispersion in the choices, whilst at the within-subjects level the effect weakens. Finally, regarding responses to risk premium, we find that compared to only gains treatments sensitivity is lower in the mixed lotteries treatments (SL and LL). In general sensitivity to risk-return is more affected by the domain than the stake size. After having described the properties of risk attitudes as captured by the SGG risk elicitation task and its three new versions, it is important to recall that the danger of using unidimensional descriptions of risk attitudes goes beyond the incompatibility with modern economic theories like PT, CPT etc., all of which call for tests with multiple degrees of freedom. Being faithful to this recommendation, the contribution of this essay is an empirically and endogenously determined bi-dimensional specification of risk attitudes, useful to describe behavior under uncertainty and to explain behavior in other contexts. Hopefully, this will contribute to create large datasets containing a multidimensional description of individual risk attitudes, while at the same time allowing for a robust context, compatible with present and even future more complex descriptions of human attitudes towards risk.

Paying for long-term performance: restructuring bankers’ pay for risk regulation

The purpose of this paper is to propose hybrid capital securities as a new approach to compensation for senior bank executives and risk-takers instead of cash or equity-based compensation currently adopted by the industry. The global financial turmoil indicated that misaligned pay-for-performance compensation arrangements encouraged management short-termism and rewarded excessive risk-taking behaviour in Anglo-Saxon system. Rather than regulating specific instruments and processes, we believe that it is much more efficient to overhaul the compensation scheme to align it with risk management and governance. This empirical paper investigates the European hybrid market by employing data from the Merrill Lynch Global Index System from 2000 to 2010. Our paper contributes to both literature and practices by designing a structured scheme to tie the executive’s interests to long-term performance of the bank, the goal of regulators and the economy at large which consequently reduce the probability of future bank failures.

Responsibility effects in decision making under risk

We systematically explore decision situations in which a decision maker bears responsibility for somebody else's outcomes as well as for her own in situations of payoff equality. In the gain domain we confirm the intuition that being responsible for somebody else's payoffs increases risk aversion. This is however not attributable to a 'cautious shift' as often thought. Indeed, looking at risk attitudes in the loss domain, we find an increase in risk seeking under responsibility. This raises issues about the nature of various decision biases under risk, and to what extent changed behavior under responsibility may depend on a social norm of caution in situations of responsibility versus naive corrections from perceived biases. To further explore this issue, we designed a second experiment to explore risk-taking behavior for gain prospects offering very small or very large probabilities of winning. For large probabilities, we find increased risk aversion, thus confirming our earlier finding. For small probabilities however, we find an increase of risk seeking under conditions of responsibility. The latter finding thus discredits hypotheses of a social rule dictating caution under responsibility, and can be explained through flexible self-correction models predicting an accentuation of the fourfold pattern of risk attitudes predicted by prospect theory. An additional accountability mechanism does not change risk behavior, except for mixed prospects, in which it reduces loss aversion. This indicates that loss aversion is of a fundamentally different nature than probability weighting or utility curvature. Implications for debiasing are discussed.

Construção e Validação da Escala de Imprevisibilidade Familiar na Infância (EIFI)

Este estudo teve o objetivo de construir e validar uma medida psicológica denominada de Escala de Imprevisibilidade Familiar na Infância (EIFI) para a população brasileira. Participaram 394 pessoas, sendo 158 adultos em conflito com a lei que já haviam passado pela prisão (média de idade=34,23 anos; DP=10,17), 122 estudantes universitários (M=19,26; DP=2,06) e 114 mulheres com idade superior a 40 anos e escolaridade a partir de ensino médio (M=51,19; DP=8,64). Foram conduzidos procedimentos de validade de conteúdo, face e construto. A análise fatorial gerou como produto um instrumento com estrutura de quatro dimensões (cuidado/apoio, recursos financeiros, alimentação e disciplina) com índices de confiabilidade satisfatórios para todas elas. Concluímos que a EIFI foi validada para a população brasileira apresentando-se no cenário nacional como um instrumento para medida de imprevisibilidade familiar na infância.

Essays on Bank Risk

This PhD Thesis is composed of three chapters, each discussing a specific type of risk that banks face. The first chapter talks about Systemic Risk and how banks get exposed to it through the Interbank Funding Market. Exposures in the said market have Systemic Risk implications because the market creates linkages, where the failure of one party can affect the others in the market. By showing that CDS Spreads, as bank risk indicators, are positively related to their Net Interbank Funding Market Exposures, this chapter establishes the above Systemic Risk Implications of Interbank Funding. Meanwhile, the second chapter discusses how banks may handle Illiquidity Risk, defined as the possibility of having sudden funding needs. Illiquidity Risk is embodied in this chapter through Loan Commitments as they oblige banks to lend to its clients, up to a certain amount of funds at any time. This chapter points out that using Securitization as funding facility, could allow the banks to manage this Illiquidity Risk. To make this case, this chapter demonstrates empirically that banks having an increase in Loan Commitments, may experience an increase in risk profile but such can be offset by an accompanying increase in Securitization Activity. Lastly, the third chapter focuses on how banks manage Credit Risk also through Securitization. Securitization has a Credit Risk management property by allowing the offloading of risk. This chapter investigates how banks use such property by looking at the effect of securitization on the banks’ loan portfolios and overall risk and returns. The findings are that securitization is positively related to loan portfolio size and the portfolio share of risky loans, which translates to higher risk and returns. Thus, this chapter points out that Credit Risk management through Securitization may be have been done towards higher risk taking for high returns.

Self-esteem development from age 14 to 30 years: A longitudinal study

We examined the development of self-esteem in adolescence and young adulthood. Data came from the Young Adults section of the National Longitudinal Survey of Youth, which includes 8 assessments across a 14-year period of a national probability sample of 7,100 individuals age 14 to 30 years. Latent growth curve analyses indicated that self-esteem increases during adolescence and continues to increase more slowly in young adulthood. Women and men did not differ in their self-esteem trajectories. In adolescence, Hispanics had lower self-esteem than Blacks and Whites, but the self-esteem of Hispanics subsequently increased more strongly, so that at age 30 Blacks and Hispanics had higher self-esteem than Whites. At each age, emotionally stable, extraverted, and conscientious individuals experienced higher self-esteem than emotionally unstable, introverted, and less conscientious individuals. Moreover, at each age, high sense of mastery, low risk taking, and better health predicted higher self-esteem. Finally, the results suggest that normative increase in sense of mastery accounts for a large proportion of the normative increase in self-esteem.

Psychosocial predictors of HIV testing behaviors among high risk heterosexuals

Though a lot of progress has been made in the treatment, prevention, and in increasing the knowledge and awareness of HIV/AIDS, the CDC reports that over 21% of the people infected with HIV are unaware of their HIV serostatus. Thirty-one percent of people infected with HIV are diagnosed late in the disease progression, often too late to prevent the transmission or the progression of HIV to AIDS. CDC has set a goal to increase by the year 2010, the number of people aware of the HIV serostatus by 5%. ^ This study examined the association between decision-making and risk-taking (assessed using the decision-making confidence and risk-taking scales of the Texas Christian University Self Rating Form) and HIV testing behaviors within a population of heterosexuals at risk for HIV infections living in Harris County, Texas (N=923). Data used in the study was obtained during the first cycle of the National HIV Behavioral Surveillance among heterosexuals at risk for HIV infection (NHBS-HET1), conducted from October, 2006 to June, 2007. Eighty percent of the study population reported testing for HIV at some point in their lives. The results showed that individuals who scored high (>3.3) on the decision-making confidence scale of the TCU/SRF were more likely to be tested for HIV when compared to those who scored low on the scale (OR= 2.02, 95% CI= 1.44–2.84), and that individuals who score low on the risk-taking scale of the TCU/SRF were more likely to have been tested for HIV when compared to those who scored high on the scale (OR= 1.65, 95% CI= 1.2–2.31). Several demographic factors were also assessed for their association with HIV testing behaviors. Only sex was found to be associated with HIV testing. ^ The findings suggest that risk-taking and decision-making are predictors of HIV testing behaviors such as prior HIV testing within heterosexuals living in high-risk areas of Houston, Texas, and that intervention designed to improve the risk-taking and decision-making attributes of this population might improve HIV testing within this population.^

Expert Approaches to Mental Toughness Development in the High Risk Sport of Diving

Research focusing on mental toughness development and high risk sport is limited to one examination of elite gymnasts' perceptions. Coaches have acknowledged that mental toughness is important to performance success, while admitting they do not know effective development strategies. The aim of the current research is to address both these concerns by employing a grounded theory approach to ascertain elite diving coaches perceptions of mental toughness development and what mental toughness is. Seven diving coaches volunteered and were interviewed for an average of 49 minutes. They all coached an athlete that participated either in the world championships or Olympic games since 2008. Participants reported that mental toughness was the ability of a diver to perform a movement in a crucial moment that requires focus, extending beyond their comfort zone, overcoming fear, and never giving up. Mentaltoughness may not be the appropriate term due to its lack of multicultural sensitivity. Participants felt that dealing with adversity was something divers would have to constantly process. Mental toughness can be developed by the coach, the environment, or individual athlete. Unique attributes specific to divers were an awareness of self and a distinct level of knowing what the athlete was going to do. More research needs to be conducted to determine if these concepts can be generalized to other high risk sports. Future research could help establish a valid quantitative measure of mental toughness development.

Social differentiation of risk: perceptions of the future in drought-prone Central Niger

A snapshot of two Tuareg-dominated 'communes rurales' in the pastoral-agricultural transition zones of Maradi and Tahoua regions, Central Niger, shows that, despite the openly shared 'inevitable natural hazard' drought discourse, risk-taking action in response to drought-related dangers is sharply polarized according to social position. On the one hand the dominant Tuareg minority perceive drought not only as danger for their herds but also as opportunity to increase their political following through the channelling of drought relief benefits to their supporters. On the other hand, the majority of commune households, living on the brink of economic viability, cultivate social links with the dominant families in order to secure access to water, land and humanitarian aid; and household members are forced into more and more frequent and distant out-migration. Certain leaders, well-informed about national land policy and practice, focus their efforts for a better future on the consolidation of community land rights through the promotion of certain sedentarization and land privatization initiatives; however the resulting increased land pressure in key locations may unwittingly expose inhabitants to even worse drought-linked crises in the future. Bibliogr., notes, sum. in English and French

Understanding driver performance variability and perception of risk: driver hazard perception research plan.

Federal Highway Administration, Washington, D.C.

Improving family functioning and child outcome in methadone maintained families: the Parents Under Pressure programme

Twelve families responded to posters displayed in a methadone clinic for inclusion in a pilot study assessing the viability and potential utility of an intensive, multi-component family-focused intervention, the Parents Under Pressure programme. The programme was designed to improve child behaviour, decrease parental stress and improve family functioning in methadone-maintained families by targeting affect regulation, mood, views of self as a parent, drug use and parenting skills. Nine of the families completed the programme delivered in their homes; eight were recontacted at 3 months. Each family reported significant improvements in three domains: parental functioning, parent - child relationship and parental substance use and risk behaviour. In addition to the changes in family functioning, the majority of families reported a decrease in concurrent alcohol use, HIV risk-taking behaviour and maintenance dose of methadone. The families reported high levels of satisfaction with the programme. It is recommended that future studies include independent measures (e.g. behavioural observations) of child outcome and parental functioning. The results were optimistic and provided the impetus to evaluate the treatment programme using a randomized controlled trial.

Drivers' ratings of different components of their own driving skill: A greater illusion of superiority for skills that relate to accident involvement

Different components of driving skill relate to accident involvement in different ways. For instance, while hazard-perception skill has been found to predict accident involvement, vehicle-control skill has not. We found that drivers rated themselves superior to both their peers and the average driver on 18 components of driving skill (N = 181 respondents). These biases were greater for hazard-perception skills than for either vehicle-control skills or driving skill in general. Also, ratings of hazard-perception skill related to self-perceived safety after overall skill was controlled for. We suggest that although drivers appear to appreciate the role of hazard perception in safe driving, any safety benefit to be derived from this appreciation may be undermined by drivers' inflated opinions of their own hazard-perception skill. We also tested the relationship between illusory beliefs about driving skill and risk taking and looked at ways of manipulating drivers' illusory beliefs.

Acute alcohol consumption and mechanism of injury

Objective: The purpose of this study was to determine whether injury mechanism among injured patients is differentially distributed as a function of acute alcohol consumption (quantity, type, and drinking setting). Method: A cross-sectional study was conducted between October 2000 and October 2001 in the Gold Coast Hospital Emergency Department, Queensland, Australia. Data were collected quarterly over a 12-month period. Every injured patient who presented to the emergency department during the study period for treatment of an injury sustained less than 24 hours prior to presentation was approached for interview. The final sample comprised 593 injured patients (males = 377). Three measures of alcohol consumption in the 6 hours prior to injury were obtained from self-report: quantity, beverage type, and drinking setting. The main outcome measure was mechanism of injury which was categorized into six groups: road traffic crash (RTC), being hit by or against something, fall, cut/piercing, overdose/poisoning, and miscellaneous. Injury intent was also measured (intentional vs unintentional). Results: After controlling for relevant confounding variables, neither quantity nor type of alcohol was significantly associated with injury mechanism. However, drinking setting (i.e., licensed premise) was significantly associated with increased odds of sustaining an intentional versus unintentional injury (odds ratio [OR] = 2.79, 95% confidence interval [CI] = 1.4-5.6); injury through being hit by/against something versus other injury types (OR = 2.59, 95% CI = 1.4-4.9); and reduced odds of sustaining an injury through RTC versus non-RTC (OR = 0.02, 95% CI = 0.004-0.9), compared with not drinking alcohol prior to injury. Conclusions: No previous analytical studies have examined the relationship between injury mechanism and acute alcohol consumption (quantity, type, and setting) across all types of injury and all injury severities while controlling for potentially important confounders (demographic and situational confounders, risk-taking behavior, substance use, and usual drinking patterns). These data suggest that among injured patients, mechanism of injury is not differentially distributed as a function of quantity or type of acute alcohol consumption but may be differentially distributed as a function of drinking setting (i.e., RTC, intentional injury, being hit). Therefore, prevention strategies that focus primarily on the quantity and type of alcohol consumed should be directed generically across injury mechanisms and not limited to particular cause of injury campaigns.

Risk homeostasis theory in simulated environments

This thesis has two aims. First, it sets out to develop an alternative methodology for the investigation of risk homeostasis theory (RHT). It is argued that the current methodologies of the pseudo-experimental design and post hoc analysis of road-traffic accident data both have their limitations, and that the newer 'game' type simulation exercises are also, but for different reasons, incapable of testing RHT predictions. The alternative methodology described here is based on the simulation of physical risk with intrinsic reward rather than a 'points pay-off'. The second aim of the thesis is to examine a number of predictions made by RHT through the use of this alternative methodology. Since the pseudo-experimental design and post hoc analysis of road-traffic data are both ill-suited to the investigation of that part of RHT which deals with the role of utility in determining risk-taking behaviour in response to a change in environmental risk, and since the concept of utility is critical to RHT, the methodology reported here is applied to the specific investigation of utility. Attention too is given to the question of which behavioural pathways carry the homeostasis effect, and whether those pathways are 'local' to the nature of the change in environmental risk. It is suggested that investigating RHT through this new methodology holds a number of advantages and should be developed further in an attempt to answer the RHT question. It is suggested too that the methodology allows RHT to be seen in a psychological context, rather than the statistical context that has so far characterised its investigation. The experimental findings reported here are in support of hypotheses derived from RHT and would therefore seem to argue for the importance of the individual and collective target level of risk, as opposed to the level of environmental risk, as the major determinant of accident loss.