Muslim Available Papers: results

 Noussair, et al. (2013)

o we find strong confirmatory evidence that more religious people, as measured by
church membership or attendance, are more risk averse with regard to financial
risks.
o Protestants are more risk averse than Catholics in such tasks.
o Moreover, risk aversion is positively correlated with attendance rates at religious
gatherings, and the effect is mainly driven by those who are very active religiously.
 León & Pfeifer (2017)
o First, we find that adherents of the two main Christian religions in Germany
(Protestants and Catholics) are less willing to take risks in general than non-religious
people.
o We further find that Muslims in Germany are less risk-taking in gen- eral than
Catholics, Protestants and non-religious people.
o we show that religiously affiliated individuals are in general more risk averse than
non-religious people
o We find no empirical evidence for different general risk preferences between
Catholics and Protestants
o Furthermore, we show that denominational affiliation per se af- fects investment
decisions.
o In contrast, Muslims are less likely than Christians and non-religious people to invest
in f inancial products
 Bartke & Schwarze (2008):
o Religiousness is a significant determinant of risk attitudes.
o Religious persons are less risk-tolerant than atheists.
o Moreover, religious affiliation matters: Muslims are less risk-tolerant than Christians.
o As hypothesized, Islamic belief is linked with higher risk aversion, whereas non-
religious people are relatively risk-prone.
o we find that individuals with a religious affiliation are significantly less risk-tolerant
than atheists.
o We also find that willingness to take risks decreases with the strictness and
comprehensiveness of behavioural rules, i.e., higher risk aversion among Muslims
than Protestants
 Li (2022)
o We find that more religious households engage in less risk-taking, and the effect is
more pronounced where Protestantism is more widespread than Catholicism.
 o We find that higher religiosity measured by prayer frequency is associated with
higher risk aversion, and the higher concentration of Catholic believers in a region is
associated with higher risk taking motives

Muslim Available Papers: mechanisms

 Bartke & Schwarze (2008):

o Azzi and Ehrenberg’s (1975) micro-economic model of religious demand states
that believers invest while alive to benefit from religious goods after death.
o Hence, we may expect religiosity to be an expression of risk propensity—even
when, as Iannaccone (1998) points out, “The promised rewards may never
materialize, the beliefs may prove false, the sacrifices may be for naught“
o On the other hand, the individual affiliation with a (religious) community reduces
the risks of fraud and cheating on the part of other members and may, thus,
actually be an expression of risk aversion.
o Miller (2000) suggests religious belief to be a rationally chosen risk-averse
behaviour driven by a society’s belief that a specific religious faith and
accompanying behaviour are required to ensure a rewarding afterlife.
o We posit that God and religious community function as a superior monitoring
institution.
o We assume that in contrast to athiests, people with a strong religious faith act
and live in accordance with rules that generally limit their risky behaviour.
o For example, the Qur’an limits the riskiness of financial and health-related
behaviour by prohibiting gambling and drinking (Qur’an 5:90, 5:91).
o Where religious thinking is primarily geared towards the afterlife, religious
people tend to ensure that their earthly lives are pleasing to God.
o This means living in conformity with religious scriptures and directives as well as
with broader social norms associated with the faith.1
o Atheists, however, are condemned—broadly formulated—to optimize their
limited lives in this world.
o Although they live in accordance with moral values and social norms, they do not
feel bound by additional religious rules limiting risky behaviour.
o Atheists tend to dare more to exhaust the possibilities of their restricted lifetime.
o Atheists are said to be risk-prone, since they depart from this behaviour in favour
of profits in this world (ibid).
o Assuming that religion is a determinant of risk-taking behaviour, we may also
want to compare the differences among specific religions in individual risk
attitudes
 o According to our concept of religion as a monitoring institution, this will depend
on the rules entailed by the different beliefs on risk-taking and their relative
strictness in ‘enforcing’ these rules, either directly or through community social
control.
o Just one example will illustrate our line of thought: if the Qur’an fully prohibited
ex ante interest on financial investments and the Bible explicitly prohibited usury,
while in yet other religions, say Judaism, there were no restriction on any of
these activities, then we could expect a heterogeneity of financial risk attitudes
driven by religious affiliation.
o Muslims would invest in a more risk-averse manner than Catholics.
o Atheists would invest in an even more risk-prone manner, since they would face
no regulations at all of this type.
 Li (2022)
o The underlying mechanism aligns with the social identity theory (Tajfel, 1978;
Tajfel and Turner, 1986).
 The member of a specific group follows the group’s behavior codebook to
maintain his or her group identity.

Muslim Available Papers: discussion

 Noussair, et al. (2013)

o These activities (religious practice, i.e. church attendance and prayer outside church)
are likely to expose the individual to the specific doctrine and institutions of his or
her church, which is not the case for those individuals who are strong believers, but
practice their faith mostly in private.
o We also show that religious activities and church membership behave differently in
terms of their relationship to risk aversion than memberships in other social
organizations that may potentially serve as risk-sharing institutions.
o That is, religious groups and organizations are likely to socialize their members
according to certain doctrines that relate to risk aversion, or as discussed above,
avoidance of gambling and skewed risks.
 León & Pfeifer (2017)
o The relationship be- tween religion and investments may depend on differences in
the expression of religiosity, which may be traced back to distinct so- cial and
personal influences on investment patterns (for a discus- sion, see Cosgel and
Minkler, 2004 ).
o For example, distinct informal social norms and formal laws may induce differences
in investment behaviour between societies and time.
 o Furthermore, as individu- als vary based on distinctions between social networks and
up- bringing, differences between individuals of the same religion may occur.
o Finally, individuals differ in terms of their religious com- mitment.
o Thus, individual religious beliefs may be overlapped by other identities.
o As a consequence, investment behaviour may be influenced by the most salient
belief, namely that which has the strongest impact on investment behaviour.
o Islamic banks tend to invest more conservatively than West- ern banks.
o Following the principles of Islamic law (Sharia) and the Qur’ an, the former are not
permitted to handle excessive risk- taking transactions.
o Islamic law requires risk-sharing strategies to be pursued and hence profits and
losses of financial transactions to be shared.

Muslim Available Papers: measuring risk averse

 Noussair, et al. (2013)

o Risk attitudes were measured by letting each participant choose, in five trials,
between a lottery that paid €65 or €5 with equal probability and thus had an
expected value of €35, and a sure payoff that differed by trial.
o The sure payoff varied from €20 to €40 in steps of €5. Each of the five choices was
presented on a separate screen, and the order of the sequence of sure payoffs was
counterbalanced among subjects.
o That is, for one half of participants, the first decision consisted of a choice between
the lottery and a sure payment of €20, the second decision was between the lottery
and €25, etc.
o For the other half of subjects, the first decision consisted of a choice between the
lottery and a sure payment of €40, the second decision was between the lottery and
€35 for sure, etc.
o The side of the screen (left/right) on which the lottery and the sure payoff appeared
was also counterbalanced, with one half of the subjects having the lottery always
displayed on the left of their screen, and the other half having it always shown on
the right
 León & Pfeifer (2017)
o Respondents were asked to assess their general willingness to take risks on an 11-
point Likert scale, with values between “0 –not at all willing to take risks” and “10 –
fully prepared to take risks” .
o To validate this measure, Dohmen et al. (2011) used a field experiment and
confirmed that self-reported risk attitudes predict actual risk-taking behaviour.
o As they point out, the question on the willingness to take risks in financial matters
better predicts indi- vidual investments in stocks than the general risk question.
 o Thus, unlike Bartke and Schwarze (2008) and Renneboog and Spaen- jers (2012) , we
also take into consideration the question concern- ing willingness to take risks in
financial matters.
o To elicit informa- tion on this additional risk measure, the SOEP asked people to rate
their willingness to take risks in financial matters using the same scale as for the
general risk question.
 Bartke & Schwarze (2008):
o lotteries have the disadvantage of only measuring the willingness to assume financial
risks.
o They do not tell us much about, for example, the willingness to assume health and
safety risks.
o Moreover, these lotteries are often hypothetical and not backed by observed
behaviour, while field experiments suffer from the multitude of factors that are
difficult to control for (as in the case of international comparisons of asset choices).
o The key methodological problem is that of defining a comprehensive measure of risk
attitude and observing it in a controlled environment.
o For this study, we developed a new approach to compare the risk attitudes of
peoples in a controlled environment.
o The database for empirical analysis is the German Socio Economic Panel (SOEP).3
o We study immigrants within one country (Germany), and compare their attitudes to
those of Germans.
o We use the 2004 questionnaire, in which respondents were asked to self-assess their
risk propensity on an 11-point risk scale between ‘0 Risk-averse’ and ‘10 Fully
prepared to take risks’—without making reference to any specific risk dimension.
 Li (2022)
o The survey question evaluating peoples’ risk preference is stated as follows: ‘‘When
people invest their savings, they can choose between assets that give low return
with little risk to lose money, for instance, a bank account or a safe bond, or assets
with a high return but also a higher risk of losing, for instance, stocks and shares.
Which of the following statements on the card come closest to the amount of
financial risk that you are willing to take when you save or make investments?’’ Four
categorical responses could be chosen: (1) take substantial financial risks expecting
to earn substantial returns, (2) take above-average financial risks expecting to earn
above-average returns, (3) take average financial risks expecting to earn average
returns, (4) not willing to take any financial risks.
o From the above questions, we combine the first and the second category to create a
(0,1) binary variable ‘‘financial risk-taking’’, if one would like to take a substantial
 financial risk or above-average financial risk to achieve a higher return, then this
individual is categorized as having a higher risk tolerance relative to others.

Muslim Available Papers: method

 Noussair, et al. (2013)

o Tobit regression
 León & Pfeifer (2017)
o OLS (with sampling weight)
 Bartke & Schwarze (2008):
o OLS
 Li (2022)
o Probit baseline
o Tobit robustness check using insurance participation and amount purchased
o NN Matching

Summary of results:

Religious people are less risk averse

Religiosity differential between denominations/religious affiliation/religion

Summary of mechanisms:

Implication of AE model that practicing religion in hopes of an afterlife is considered risk-taking

Other: participation in religious community express risk aversion

Summary of discussions:

Religious groups and organizations are likely to socialize their members according to certain
doctrines that relate to risk aversion

Heterogeneities of religiosity between individuals and overlapped religiosity and other personal
trait within individual

Sharia low not to engage in excessive risk

The member of a specific group follows the group’s behavior codebook to maintain his or her
group identity.

Summary of measuring risk aversion:

Lottery

Self-assessing their willingness to take risk

Summary of method

OLS

Tobit

Probit

Other: NN Matching