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Can Risk‐Averse Households Make Risky Investments? The Role of Trust in Others

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  • Alessandro Bucciol
  • Barbara Cavasso
  • Luca Zarri

Abstract

In this paper, using data from the Survey on Health, Ageing and Retirement in Europe (SHARE, 2006 and 2013 waves), we illustrate the link between individuals’ attitudes to financial risk combined with their willingness to trust others, and their investments in risky assets. Individuals who display either risk tolerance alone or – to a lesser extent – risk aversion and trust more frequently decide to buy risky assets. The comparison between Scandinavian and Mediterranean countries indicates that trust plays qualitatively different roles depending on the prevailing combination of risk attitude and trust in the area being studied.

Suggested Citation

  • Alessandro Bucciol & Barbara Cavasso & Luca Zarri, 2019. "Can Risk‐Averse Households Make Risky Investments? The Role of Trust in Others," Scandinavian Journal of Economics, Wiley Blackwell, vol. 121(1), pages 326-352, January.
    • Handle: RePEc:bla:scandj:v:121:y:2019:i:1:p:326-352
    DOI: 10.1111/sjoe.12278
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    Cited by:

    1. Fleck, Johannes & Monninger, Adrian, 2020. "Culture and portfolios: trust, precautionary savings and home ownership," Working Paper Series 2457, European Central Bank.
    2. Haidong Yuan & Chin-Hong Puah & Josephine Tan-Hwang Yau, 2022. "How Does Population Aging Impact Household Financial Asset Investment?," Sustainability, MDPI, vol. 14(22), pages 1-14, November.
    3. James Banks & Elena Bassoli & Irene Mammi, 2019. "Changing Risk Preferences at Older Ages," Working Papers 2019:01, Department of Economics, University of Venice "Ca' Foscari".
    4. Sandra Castro-González & Sara Fernández-López & Lucía Rey-Ares & David Rodeiro-Pazos, 2020. "The Influence of Attitude to Money on Individuals’ Financial Well-Being," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 148(3), pages 747-764, April.
    5. Felix Holzmeister & Martin Holmén & Michael Kirchler & Matthias Stefan & Erik Wengström, 2023. "Delegation Decisions in Finance," Management Science, INFORMS, vol. 69(8), pages 4828-4844, August.
    6. Matthias Stefan & Martin Holmén & Felix Holzmeister & Michael Kirchler & Erik Wengström, 2022. "You can’t always get what you want—An experiment on finance professionals' decisions for others," Working Papers 2022-02, Faculty of Economics and Statistics, Universität Innsbruck.

    More about this item

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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