Beyond risk seeking and risk aversion: personality and the dual nature of economic risk taking

In economic theories it is assumed that risk aversion is a typical human attitude toward risk, and differences are determined by the curvature of the utility function. The results of psychological studies have indicated, however, that people differ in how they make financial decisions under uncertainty and what motivates them to take economic risks. This paper introduces two kinds of risk taking, instrumental risk taking and stimulating risk taking, and reports their empirical examination in two studies. The purpose of these studies was to test the reliability and validity of the Stimulating–Instrumental Risk Inventory—a method used to measure the two risk taking tendencies. It was found that instrumental risk taking is related to risk preference in the investment domain and is determined by personality traits connected with orientation toward the future, the tendency to think rationally, impulsivity, and sensation seeking. Stimulating risk taking was found to be related to the preference for recreational, ethical, health, and gambling risks and was associated with personality features connected with paratelic orientation, arousal seeking, impulsivity, and strong sensation seeking. Copyright © 2001 John Wiley & Sons, Ltd.