Risk Elicitation in the Field : Survey or Experiment?

Understanding investors’ risk preferences is crucial for financial companies to manage risks and operate responsibly. Measuring risk using surveys is the standard practice in the field, but the method of incentivized experiments is a competitive alternative emerging from economic labs. It is unclear which method is more effective in eliciting risk preferences for these financial companies. We compare these methods in a FinTech wealth management company and explore how they relate to investors’ portfolio choices. The data suggests that either method is associated with the risk level of investors’ chosen portfolios, but the experimental method outperforms the survey in predicting investment decisions both in the short and long terms. These results suggest that the experimental method complements the traditional survey method and improves elicitation quality. Our findings have important implications for choosing elicitation methods in the financial industry