The development of risk aversion and prudence in Chinese children and adolescents

This study experimentally evaluates the risk preferences of children and adolescents living in an urban Chinese environment. We use a simple binary choice task that tests risk aversion as well as prudence. This is the first test for prudence in children and adolescents. Our results reveal that subjects from grades 5 to 11 (10 to 17 years) make mostly risk averse and prudent choices. With respect to risk aversion behavior of 3rd graders (8 to 9 years) does not differ statistically from risk neutrality. We also find 3rd graders to make mostly prudent choices. We also find evidence for a transmission of preferences: risk aversion is significantly correlated between children and their parents. Also, prudence is significantly correlated between girls (but not boys) and their parents.