The Determinants of Risk Attitudes in Ireland and the United Kingdom

An Analysis of the Determinants of Risk Attitudes in Ireland and the United Kingdom
- by Kieran McQuinn and Nuala O’Donnell
Irish Central Bank Research Paper, May 2010

This paper (linked above) uses a measure of attitude to risk in the financial domain. Attitude to risk is elicited using a six-point Likert scale; the information in this variable is transformed into a binary indicator which is the regressand in a probit model. The results show that people from ethnic backgrounds appear to be more risk averse, while married people and males seem to have a significant preference for risk. It also appears that the greater the degree of population density, the greater the preference for risk. It is suggested that improving educational attainment within the population can increase preferences for risk. It is also suggested that risk preferences are a significant determinant of an individuals ability to accumulate wealth.