The Elusive Search for Stable Risk Preferences

In the early morning hours of June 20, 2011 Ryan Dunn was driving his Porsche 911 GTE up to 140 miles per hour through the Pennsylvania countryside. The car careened over a guardrail and into a wooded area, killing Dunn and a passenger in a fiery crash. A toxicology report later determined that Dunn’s blood alcohol level was more than twice the legal limit. Many observers found the accident somewhat unsurprising because Dunn was best known for performing dangerous stunts in the popular Jackass television and movie series. As one blogger put it: “This is the type of person he was. He was a risk-taker”. Indeed, the headline in the Philadelphia Daily News later read: “Dunn deal: Death of a risk-taker.” The public’s response to the Ryan Dunn tragedy illustrates a prevalent belief that there are consistent individual differences in not only people’s risk-taking behavior but also in their underlying appetite for risk. Several industries depend on this assumption. For instance, in financial services the “suitability doctrine” legally requires financial advisors to assess their clients’ risk preference before dispensing advice (Mundheim, 1965). Likewise, most social– science disciplines traditionally assume stable and measurable individual differences in risk preference. However, based on our reading of the empirical literature, the common intuition that risk preference is a stable disposition may reflect more of an attribution error than empirical fact.