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Individual risk attitudes and the composition of financial portfolios: Evidence from German household portfolios

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  • Barasinska, Nataliya
  • Schäfer, Dorothea
  • Stephan, Andreas

Abstract

This paper explores the relationship between the self-declared risk aversion of private investors and their propensity to hold incomplete portfolios of financial assets. The analysis is based on household survey data from the German Socioeconomic Panel (SOEP) that provides a reliable measure of individual attitudes toward financial risk. Our findings suggest that more risk averse households tend to hold incomplete portfolios consisting mainly of a few risk-free assets. We also find that the propensity to acquire additional assets is highly dependent on whether liquidity and safety needs are met.

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Bibliographic Info

Article provided by Elsevier in its journal The Quarterly Review of Economics and Finance.

Volume (Year): 52 (2012)
Issue (Month): 1 ()
Pages: 1-14

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Handle: RePEc:eee:quaeco:v:52:y:2012:i:1:p:1-14

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Web page: http://www.elsevier.com/locate/inca/620167

Related research

Keywords: Private households; Portfolio diversification; Risk aversion;

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