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Stability of risk attitudes and media coverage of economic news

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  • Franziska Tausch

    (Max Planck Institute for Research on Collective Goods, Bonn)

  • Maria Zumbuehl

    (University of Bern)

Abstract

This paper investigates the impact of exogenous changes in individuals' perceived economic environment on their self-stated risk attitudes by exploiting changes in media coverage of economic news. We use information on risk attitudes from the German Socioeconomic Panel and combine it with data on the average daily frequency of economic news reports during the year and the month preceding the date of the risk attitude elicitation. Using fixed effects regressions we observe effects of both long and short term changes in the media. We find that an increase in economic news in the previous year, irrespective of whether the news are bad or good, is negatively related to individuals' willingness to take risks. An increase in news that are aggregated over the previous month, however, relates to a decrease in risk aversion if the news are predominantly good. The strength of the relations depends on individuals' personal characteristics and personality traits. A positive correlation between bad news coverage and individuals' worries suggests that changes in risk perception may mediate the relation between news coverage and risk attitudes.

Suggested Citation

  • Franziska Tausch & Maria Zumbuehl, 2016. "Stability of risk attitudes and media coverage of economic news," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2016_02, Max Planck Institute for Research on Collective Goods.
    • Handle: RePEc:mpg:wpaper:2016_02
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    Cited by:

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    3. Ongena, Steven & Savaşer, Tanseli & Şişli Ciamarra, Elif, 2022. "CEO incentives and bank risk over the business cycle," Journal of Banking & Finance, Elsevier, vol. 138(C).
    4. Jetter, Michael & Magnusson, Leandro M. & Roth, Sebastian, 2020. "Becoming sensitive: Males’ risk and time preferences after the 2008 financial crisis," European Economic Review, Elsevier, vol. 128(C).
    5. Huynh, Toan Luu Duc & Foglia, Matteo & Nasir, Muhammad Ali & Angelini, Eliana, 2021. "Feverish sentiment and global equity markets during the COVID-19 pandemic," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 1088-1108.
    6. Benesch, Christine & Loretz, Simon & Stadelmann, David & Thomas, Tobias, 2019. "Media coverage and immigration worries: Econometric evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 160(C), pages 52-67.
    7. Qianqian, Li & Yijun, Liu, 2020. "The China-Pakistan economic corridor: The Pakistani media attitudes perspective," Technology in Society, Elsevier, vol. 62(C).
    8. Alexander Benov & Maria Semenova, 2021. "Bank Runs And Media Freedom: What You Don’t Know Won’t Hurt You?," HSE Working papers WP BRP 81/FE/2021, National Research University Higher School of Economics.
    9. Brooks, Chris & Sangiorgi, Ivan & Hillenbrand, Carola & Money, Kevin, 2018. "Why are older investors less willing to take financial risks?," International Review of Financial Analysis, Elsevier, vol. 56(C), pages 52-72.
    10. Raffaele Guetto & Maria Francesca Morabito & Daniele Vignoli & Matthias Vollbracht, 2021. "Media Coverage of the Economy and Fertility," Econometrics Working Papers Archive 2021_12, Universita' degli Studi di Firenze, Dipartimento di Statistica, Informatica, Applicazioni "G. Parenti".
    11. Inam Ullah Khalil & Sehresh Hena & Usman Ghani & Raza Ullah & Inayatullah Jan & Abdul Rauf & Abdul Rehman & Azhar Abbas & Luan Jingdong, 2021. "Development and Sustainability of Rural Economy of Pakistan through Local Community Support for CPEC," Sustainability, MDPI, vol. 13(2), pages 1-17, January.

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    More about this item

    Keywords

    media coverage; economic news; stability of risk attitudes; risk perception;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles

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