Market and Accounting Measures of Risk: The Case of the Frankfurt Stock Exchange

The main purpose of this study was to explore the relationship between market and accounting measures of risk and the profitability of companies listed on the Frankfurt Stock Exchange. An important aspect of the study was to employ accounting beta coefficients as a systematic risk measure. The research considered classical and downside risk measures. The profitability of a company was expressed as ROA and ROE. When determining the downside risk, two approaches were employed: the approach by Bawa and Lindenberg and the approach by Harlow and Rao. In all the analyzed companies, there is a positive and statistically significant correlation between the average value of profitability ratios and the market rate of return on investment in their stocks. Additionally, correlation coefficients are higher for the companies included in the DAX index compared with those from the MDAX or SDAX indices. A positive and in each case a statistically significant correlation was observed for all DAX-indexed companies between all types of market betas and corresponding accounting betas. Likewise, for the MDAX-indexed companies, these correlations were positive but statistical significance emerged only for accounting betas calculated on ROA. As regards the DAX index, not every correlation was positive and significant.

Explaining Chinese Reactions to COVID-19 During the Outbreak: A Systematic Illustration

Objective: This research attempts to explore systematically factors that influence public reactions during COVID-19 pandemic, including different measures of risk perceptions, public trust in different levels of governments, and attention to news.Methods: This research uses a national stratified random sample of Chinese population and multiple linear regressions to explore the potential predictors of public reactions to coronavirus disease-2019 (COVID-19).Results: This research found that the effects of attentions to news, provincial experience, trust in government, demographics, and political cultures on risk perceptions depend on measures of risk perceptions, risk judgments vs. cognitive vs. affective risk perceptions. Moreover, the effect of culture on trust in government is consistent across different levels of government, trust in local, provincial, and central governments; living in the epicenter of COVID-19 in China decreases trust in local/provincial government but not trust in central government; public attention to news can bring both positive (trust in government) and negative (negative affect) outcomes. Finally, it confirmed positive associations among risk perception, subjective knowledge, and attention to news.Conclusion: The findings suggest challenges for risk communication.

Factors predicting citizens’ risk tolerance regarding earthquakes

<p>People tolerate different levels of risk from different hazards in their day-to-day life. Perceptions of risks and the amount of risk mitigation people desire for different hazards vary. Previous research shows that the psychometric properties of different hazards predict the level of risk people tolerate for various hazards, but not for earthquakes. Risk tolerance is likely to also be affected by factors other than the psychometric properties of hazards. This research tested how earthquakes score on psychometric risk properties compared to five other hazards, and aimed to replicate previous research on the risk factors predicting risk tolerance. Secondly, the research aimed to test if other factors, namely framing effects, risk perception and fatalistic thinking predict risk tolerance for earthquakes. In Study 1, participants from Wellington, New Zealand (N = 139) rated six different hazards (nuclear power, smoking, alcohol, driving, flying and earthquakes) on several risk characteristics and measures of risk tolerance. The results showed that the different hazards were perceived differently in terms of risk tolerance and that participants thought different risk mitigation actions were appropriate for the six hazards. Factor analysis showed that factors derived from risk characteristics did not predict risk tolerance. Study 2 (N = 173) assessed the effects of framing messages, risk perception and fatalism on risk tolerance (judgments about the firmness of the legislation; willingness to pay tax) and judgments about who should pay. The frames had an effect on participants’ concern about the risk, but did not affect the other measures. Generally participants thought that the Government should pay for strengthening buildings, however, those participants who perceived damage as preventable (fatalism measure) thought that private owners should pay for strengthening.</p>

Factors predicting citizens’ risk tolerance regarding earthquakes

<p>People tolerate different levels of risk from different hazards in their day-to-day life. Perceptions of risks and the amount of risk mitigation people desire for different hazards vary. Previous research shows that the psychometric properties of different hazards predict the level of risk people tolerate for various hazards, but not for earthquakes. Risk tolerance is likely to also be affected by factors other than the psychometric properties of hazards. This research tested how earthquakes score on psychometric risk properties compared to five other hazards, and aimed to replicate previous research on the risk factors predicting risk tolerance. Secondly, the research aimed to test if other factors, namely framing effects, risk perception and fatalistic thinking predict risk tolerance for earthquakes. In Study 1, participants from Wellington, New Zealand (N = 139) rated six different hazards (nuclear power, smoking, alcohol, driving, flying and earthquakes) on several risk characteristics and measures of risk tolerance. The results showed that the different hazards were perceived differently in terms of risk tolerance and that participants thought different risk mitigation actions were appropriate for the six hazards. Factor analysis showed that factors derived from risk characteristics did not predict risk tolerance. Study 2 (N = 173) assessed the effects of framing messages, risk perception and fatalism on risk tolerance (judgments about the firmness of the legislation; willingness to pay tax) and judgments about who should pay. The frames had an effect on participants’ concern about the risk, but did not affect the other measures. Generally participants thought that the Government should pay for strengthening buildings, however, those participants who perceived damage as preventable (fatalism measure) thought that private owners should pay for strengthening.</p>

Does Education Increase Risk Aversion in Households? Some Evidence Using Artefactual Experiments in Peru

We provide empirical evidence supporting a causal link between education and risk attitudes when using representative data from representative surveys and artefactual or lab-on-the-field experiments in Lima, Peru. We employ three standard experimental measures of risk attitudes and find that each is positively correlated with years of education. Furthermore, we suggest that this relationship may be causal as we take advantage of an identification strategy that exploits an exogenous boom in the construction of new schools in Lima, providing evidence that more education may increase risk attitudes. Our findings are further confirmed when applying a broad set of robustness tests.

Information risk management in the organization

The article discusses the concept and classification of information risks, explains the possibilities of risk management in various organizations, and suggests the main measures of risk management in commercial organizations. Special attention is paid to the issues of information risk management in organizations.

The evolution of disgust for pathogen detection and avoidance

The behavioral immune system posits that disgust functions to protect animals from pathogen exposure. Therefore, cues of pathogen risk should be a primary driver influencing variation in disgust. Yet, to our knowledge, neither the relationship between current pathogen risk and disgust, nor the correlation between objective and perceived pathogen risk have been addressed using ecologically valid measures in a global sample. The current article reports two studies addressing these gaps. In Study 1, we include a global sample (n = 361) and tested the influence of both perceived pathogen exposure and an objective measure of pathogen risk—local communicable infectious disease mortality rates—on individual differences in pathogen and sexual disgust sensitivities. In Study 2, we first replicate Study 1’s analyses in another large sample (n = 821), targeting four countries (US, Italy, Brazil, and India); we then replaced objective and perceived pathogen risk with variables specific to the SARS-CoV-2 pandemic. In Study 1, both local infection mortality rates and perceived infection exposure predicted unique variance in pathogen and sexual disgust. In Study 2, we found that perceived infection exposure positively predicted sexual disgust, as predicted. When substituting perceived and objective SARS-CoV-2 risk in our models, perceived risk of contracting SARS-CoV-2 positively predicted pathogen and sexual disgust, and state case rates negatively predicted pathogen disgust. Further, in both studies, objective measures of risk (i.e., local infection mortality and SARS-CoV-2 rates) positively correlated with subjective measures of risk (i.e., perceived infection exposure and perceived SARS-CoV-2 risk). Ultimately, these results provide two pieces of foundational evidence for the behavioral immune system: 1) perceptions of pathogen risk accurately assay local, objective mortality risk across countries, and 2) both perceived and objective pathogen risk explain variance in disgust levels.

Do personal values explain variation in satisficing measures of risk?

PurposeThe role of personal value systems as antecedents to risk has been largely ignored. Following Gigerenzer's view of ecological rationality, the authors argue an individual's personal value system serves as concrete motivations that guide risky choices and facilitate adaptation to one's environment.Design/methodology/approachThe authors elicit risk attitudes using a satisficing-based risk elicitation method that exploits the idea of worst-case aspiration or minimum portfolio returns given a portfolio comprising a safe and risky prospect. The elicited worst-case aspiration allows for more descriptive and natural ways of characterizing attitudes to risk (i.e. satisficing measures of risk). Using the Schwartz Value Survey, the authors assess the relative importance individuals place on value systems, such as personal focus versus social focus. The authors argue that preference to value systems has linkages with the worst-case aspiration setting emphasized in the satisficing task.FindingsThis study’s findings suggest that individuals who are willing to give up higher potential returns to protect their downside risk (by setting higher worst-case aspiration) are positively associated with personal focus—concern about own outcomes than social focus—concern about the outcomes for others or established institutions.Research limitations/implicationsCurrently, the study’s setting is in the domain of financial decision-making. Going forward, milestones could be set for studying risky real-world choices by simply changing the risk measure in different contexts, such as job choices, education, health and social interactions.Originality/valueThis study contributes to the discussion on the psychometric structure of risk. Prescriptive benefits of satisficing as a positive heuristic, which is interpreted as setting achievable goals or aspiration levels, are extensive and recognized in various industries ranging from agriculture, airlines, insurance to financial advising. More recently, cognitive processes, such as emotions and personal value systems, are recognized as a type of social cognition that subserve heuristic functions that can guide behavior quickly and accurately.