Risk and Time Preference in Consumer Financial Behavior

Abstract

We conducted experiments to elicit risk attitudes and time preferences for 161 participants up to the age of 84 years old. These are compared to their self-reported behavior in daily financial matters. The results show that individual differences in financial behavior are significant in predicting risk and time preferences. Risk aversion is linked to precautionary saving and spending and is inversely correlated with an interest in finance. More consistent time discounting goes with an interest in finance and concern about saving, whereas the level of anxiety predicts hyperbolic discounting behavior.