TY - JOUR AU - Einav, Liran AU - Finkelstein, Amy AU - Pascu, Iuliana AU - Cullen, Mark R TI - How general are risk preferences? Choices under uncertainty in different domains. JF - National Bureau of Economic Research Working Paper Series VL - No. 15686 PY - 2010 Y2 - January 2010 DO - 10.3386/w15686 UR - http://www.nber.org/papers/w15686 L1 - http://www.nber.org/papers/w15686.pdf N1 - Author contact info: Liran Einav Stanford University Department of Economics 579 Serra Mall Stanford, CA 94305-6072 Tel: 650/723-3704 Fax: 650/725-5702 E-Mail: leinav@stanford.edu Amy Finkelstein Department of Economics, E52-442 MIT 50 Memorial Drive Cambridge, MA 02142 Tel: 617/253-4149 Fax: 617/868-2742 E-Mail: afink@mit.edu Iuliana Pascu E-Mail: i-pascu@kellogg.northwestern.edu Mark R. Cullen Stanford University School of Medicine 1265 Welch Rd X338 Stanford, CA 94305 Tel: 650.721.6209 Fax: 650.723.8596 E-Mail: mrcullen@stanford.edu AB - We examine the extent to which an individual's actual insurance and investment choices display a stable ranking in willingness to bear risk, relative to his peers, across different contexts. We do so by examining the same individuals' decisions regarding their 401(k) asset allocations and their choices in five different employer-provided insurance domains, including health and disability insurance. We reject the null that there is no domain-general component of preferences. Among the five insurance domains, the magnitude of the domain-general component of preferences appears substantial; we find for example that one's choices in other insurance domains are substantially more predictive of one's choice in a given insurance domain than either one's detailed demographic characteristics or one's claims experience in that domain. However, we find considerably less predictive power between one's insurance choices and the riskiness of one's 401(k) asset allocations, suggesting that the common element of an individual's preferences may be stronger among domains that are "closer" in context. We also find that the relationship between insurance and investment choices appears considerably larger for employees who may be associated with better "financial sophistication." Overall, we view our findings as largely consistent with an important domain-general component of risk preferences. ER -