Theory and Decision

, Volume 19, Issue 1, pp 1–29 | Cite as

A portfolio of risk measures

  • Kenneth R. Maccrimmon
  • Donald A. Wehrung
Article

Abstract

A comprehensive set of sixteen measures of willingness to take risks has been developed. This set includes measures from three categories: measures from standardized risky situations having an underlying theory of risk, measures inferred from revealed choices in financial decisions, and measures derived from attitudes. A study of over 500 top-level business executives shows significant relationships within categories, but relatively little relationship across categories. Context differences, especially personal versus business situations and opportunities versus threats, underlie the responses.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Alderfer, C. P. and Bierman, H. Jr.: 1970, ‘Choices with risk: beyond the mean and variance’, Journal of Business, 43, 341–353.Google Scholar
  2. Arrow, K. J.: 1951, Social Choice and Individual Values, Wiley, New York.Google Scholar
  3. Arrow, K. J.: 1971, Essays in the Theory of Risk-Bearing, Markham Publishing Co., Chicago.Google Scholar
  4. Bassler, J. F.: 1972, ‘The consistency of risk attitudes in decision making under uncertainty’, Ph.D. dissertation, Carnegie-Mellon University.Google Scholar
  5. Bassler, J. F., MacCrimmon, K. R., and Stanbury, W. T.: 1973, ‘Risk attitudes of U.S. and Canadian top managers’, a paper presented at the meeting of the Fourth International Conference on Subjective Probability, Utility and Decision Making, Rome.Google Scholar
  6. Bassler, J. F., MacCrimmon, K. R., Stanbury, W. T., and Wehrung, D. A.: 1978, ‘Multiple criteria dominance models: an empirical study of investment preferences’, in S. Zionts (ed.) Multiple Criteria Problem Solving, Springer-Verlag, Berlin.Google Scholar
  7. Brichacek, V.: 1968, ‘Comparative analysis of decision processes’, Ceskoslovenska Psychologie, 12, 456–460.Google Scholar
  8. Campbell, D. T. and Fiske, D. W.: 1959, ‘Convergent and discriminant validation by the multitrait-multimethod matrix’, Psychological Bulletin, 56, 81–105.Google Scholar
  9. Cohn, R. A., Lewellen, W. G., Lease, R. C., and Schlarbaum, G. G.: 1975, ‘Individual investor risk aversion and investment portfolio composition’, Journal of Finance, 30, 605–620.Google Scholar
  10. Cummings, L. L., Harnett, D. L., and Stevens, O. J.: 1971, ‘Risk, fate, conciliation and trust: an international study of attitudinal differences among executives’, Academy of Management Journal, 14, 285–304.Google Scholar
  11. Fischhoff, B., Lichtenstein, S., Slovic, P., Derby, S., and Keeney, R.: 1981, Acceptable Risk, Cambridge University Press, New York.Google Scholar
  12. Frederiksen, N., Saunders, D. R., and Wand, B.: 1957, ‘The in-basket test’, Psychological Monographs: General and Applied, 71, 438.Google Scholar
  13. Greene, M. R.: 1963, ‘Attitudes toward risk and a theory of insurance consumption’, Journal of Insurance, 30, 165–182.Google Scholar
  14. Greene, M. R.: 1964, ‘Insurance mindedness - applications for insurance theory’, Journal of Risk and Insurance, 31, 27–38.Google Scholar
  15. Hammond, J. D., Houston, D. B., and Melander, E. R.: 1967, ‘Determinants of household life insurance premium expenditures: an empirical investigation’, Journal of Risk and Insurance, 34, 397–408.Google Scholar
  16. Hershey, J. C., Kunreuther, H. C., and Schoemaker, P. J. H.: 1982, “Sources of bias in assessment procedures for utility functions”, Management Science, 28, 936–954.Google Scholar
  17. Hershey, J. C. and Schoemaker, P. J. H.: 1985, ‘Probability vs. certainty equivalence methods in utility measurement: are they equivalent?’ Management Science, forthcoming.Google Scholar
  18. Higbee, K. L.: 1971, ‘Expression of ‘Walter Mitty-ness’ in actual behavior’, Journal of Personality and Social Psychology, 20, 416–422.Google Scholar
  19. Jackson, D. N., Hourany, L. and Vidmar, N. J.: 1972, ‘A four-dimensional interpretation of risk taking’, Journal of Personality, 40, 483–501.Google Scholar
  20. Kahneman, D. and Tversky, A.: 1979, ‘Prospect theory: an analysis of decision under risk’, Econometrica, 47, 263–291.Google Scholar
  21. Kogan, N. and Wallach, M. A.: 1964, Risk Taking: A Study in Cognition and Personality, Holt, Rinehart and Winston, New York.Google Scholar
  22. Kogan, N. and Wallach, M. A.: 1967, ‘Risk taking as a function of the situation, the person, and the group’, in G. Mandler (ed.) New Directions in Psychology, III, Holt, Rinehart and Winston, New York.Google Scholar
  23. Kunreuther, H., Linnerooth, J., Lathrop, J., Atz, H., MacGill, S., Mandl, C., Schwartz, M., and Thompson, M.: 1983, Risk Analysis and Decision Processes: The Siting of LEG Facilities in Four Countries, Springer-Verlag, New York.Google Scholar
  24. Laughhunn, D. J., Payne, J. W., and Crum, R.: 1980, ‘Managerial risk preferences for below target returns’, Management Science, 26, 1238–1249.Google Scholar
  25. MacCrimmon, K. R. and Wehrung, D. A.: 1984, ‘The Risk In-Basket’, Journal of Business, 57, 367–387.Google Scholar
  26. MacCrimmon, K. R. and Wehrung, D. A.: 1985, Taking Risks: The Management of Uncertainty, Free Press, New York, forthcoming.Google Scholar
  27. Maehr, M. L. and Videbeck, R.: 1968, ‘Predisposition to risk and persistence under varying reinforcement-success schedules’, Journal of Personality and Social Psychology, 9, 96–100.Google Scholar
  28. Markowitz, H. M.: 1952, ‘Portfolio selection’, Journal of Finance, 7, 77–91.Google Scholar
  29. Markowitz, H. M.: 1959, Portfolio Selection, Wiley, New York.Google Scholar
  30. Pratt, J. W.: 1964, ‘Risk aversion in the small and in the large’, Econometrica, 32, 122–136.Google Scholar
  31. Rotter, J. B.: 1966, ‘Generalized expectancies for internal versus external control of reinforcement’, Psychological Monographs, 80, 1–28.Google Scholar
  32. Shure, G. H. and Meeker, R. J.: 1967, ‘A personality/attitude schedule for use in experimental bargaining studies’, Journal of Psychology, 65, 233–252.Google Scholar
  33. Slovic, P.: 1962, ‘Convergent validation of risk taking measures’, Journal of Abnormal and Social Psychology, 65, 68–71.Google Scholar
  34. Slovic, P.: 1964, ‘Assessment of risk taking behavior’, Psychological Bulletin, 61, 220–233.Google Scholar
  35. Slovic, P.: 1972, ‘Information processing, situation specificity, and the generality of risk-taking behavior’, Journal of Personality and Social Psychology, 22, 128–134.Google Scholar
  36. Slovic, P., Fischhoff, B., and Lichtenstein, S.: 1980, ‘Perceived risk’, in R. C. Schwing and W. A. Albers Jr. (eds.) Societal Risk Assessment: How Safe is Safe Enough? Plenum, New York.Google Scholar
  37. Stoner, A. F. J.: 1961, ‘A comparison of individual and group decisions involving risk’, Master's Thesis, M.I.T.Google Scholar
  38. Watts, H. W. and Tobin, J.: 1967, ‘Consumer expenditures and the capital account’, in D. D. Hester and J. Tobin (eds.), Studies of Portfolio Behavior, Wiley, New York, 1–39.Google Scholar
  39. Wehrung, D. A., MacCrimmon, K. R., and Brothers, K. M.: 1984, ‘Utility assessment: domains, stability, and equivalence procedures’, Canadian Journal of Operational Research and Information Processing, 22, 98–115.Google Scholar
  40. Weinstein, E. and Martin, J.: 1969, ‘Generality of willingness to take risks’, Psychological Reports, 24, 499–501.Google Scholar
  41. Weinstein, M. S.: 1969, ‘Achievement motivation and risk preference’, Journal of Personality and Social Psychology, 13, 153–172.Google Scholar
  42. Zuckerman, M., Kolin, E. A., Price, L., and Zoob, I.: 1964, ‘Development of a sensation-seeking scale’, Journal of Consulting Psychology, 28, 477–482.Google Scholar

Copyright information

© D. Reidel Publishing Company 1985

Authors and Affiliations

  • Kenneth R. Maccrimmon
    • 1
  • Donald A. Wehrung
    • 1
  1. 1.Faculty of Commerce and Business Administration, University of British ColumbiaVancouverCanada

Personalised recommendations