I have 5 different questions in survey data which is used to measure degree of individuals risk-taking behaviour. I need to use all these information to find my Y-variable (capturing risk behaviour of individuals).
I am attaching the questions here along with dataset for some valuable input.
You can use all questions to determine when does an individual switch between the lottery and the sure payment. This information gives you the individual's degree of risk aversion.
For example, if an individual prefers the sure payoff to the lottery in the first question, he states that he is risk averse (because the lottery has an expected value of 100, which is equal to the sure payoff). His degree of risk aversion increases if he still prefers the sure payment when the sure payoff decreases as in the next two questions.
Similarly, if the individual prefers the lottery in the first question, he states that he is risk tolerant. The last questions examine how strong is his risk tolerance by increasing the size of the sure payoff. A rejection of higher sure payoffs indicates a stronger risk tolerance (lower risk aversion). You can calculate the degree of risk aversion if you assume a particular utility function. This is then your y-variable that you are looking for.
You can use all questions to determine when does an individual switch between the lottery and the sure payment. This information gives you the individual's degree of risk aversion.
For example, if an individual prefers the sure payoff to the lottery in the first question, he states that he is risk averse (because the lottery has an expected value of 100, which is equal to the sure payoff). His degree of risk aversion increases if he still prefers the sure payment when the sure payoff decreases as in the next two questions.
Similarly, if the individual prefers the lottery in the first question, he states that he is risk tolerant. The last questions examine how strong is his risk tolerance by increasing the size of the sure payoff. A rejection of higher sure payoffs indicates a stronger risk tolerance (lower risk aversion). You can calculate the degree of risk aversion if you assume a particular utility function. This is then your y-variable that you are looking for.
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