2016 | OriginalPaper | Chapter
Risk Preference
Author : W. Fred van Raaij
Published in: Understanding Consumer Financial Behavior
Publisher: Palgrave Macmillan US
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Many financial decisions are related to risk. Risk preference is not only an important concept for investment behavior ( chapter 7 ), but also for consumer credit ( chapter 4 ), insurance ( chapter 5 ), pension plans ( chapter 6 ), tax behavior ( chapter 8 ), and becoming a victim of fraud ( chapter 9 ). Risk is experienced by most people as the likelihood of loss. In most cases, risk cannot be established objectively but is perceived risk, depending on people’s interpretation of risk-relevant information. People differ in their risk preference and risk taking, based on personal characteristics and situational factors such as framing.