An Ohio State University researcher thinks the current measures of evaluating tolerance for risk are based more on intuition rather than on solid research. So he has put together a new measurement survey with easy-to-understand illustrations and questions based on economic theory about risk aversion. He also has been conducting studies to test this. For those who want to give it a try, there's a link at the bottom of the article which takes you to the survey.

The survey is primarily composed of three questions which ask the person to choose between two pension choices. One is a pension with the yearly income equals pre-retirement income. The other is a pension that has two possibilities: one with a 50% chance of receiving double your pre-retirement income and the other with a 50% chance of receiving an income between 80% to 50% of your pre-retirement income.

It seems too simple for me. A 50% reduction in my yearly income may be bad, but it's manageable. I'm more worried about something like a 90% reduction. If one has a well diversified stock and bond portfolio, this should be rare, but it's not a zero percent chance.

 

Submitted: Jul 4, 2008    Views: 122    Comments: 0    Likes: 1   


View Article: http://www.eurekalert.org/pub_releases/2005-01/osu-nmh012505.php


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