Risk Aversion and Wealth: Evidence from Person-to-Person Lending Portfolios
AbstractWe estimate risk aversion from the actual financial decisions of 2,168 investors in Lending Club (LC), a person-to-person lending platform. We develop a methodology that allows us to estimate risk aversion parameters from each portfolio choice. Since the same individual makes repeated investments, we are able to construct a panel of risk aversion parameters that we use to disentangle heterogeneity in attitudes towards risk from the elasticity of investor-specific risk aversion to changes in wealth. In the cross section, we find that wealthier investors are more risk averse. Using changes in house prices as a source of variation, we find that investors become more risk averse after a negative wealth shock. These preferences consistently extrapolate to other investor decisions within LC.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16063.
Date of creation: Jun 2010
Date of revision:
Note: AP CF ME
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Find related papers by JEL classification:
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- D14 - Microeconomics - - Household Behavior - - - Personal Finance
- E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Ngoc-Khanh Tran & Richard J. Zeckhauser, 2011.
"The Behavior of Savings and Asset Prices When Preferences and Beliefs are Heterogeneous,"
NBER Working Papers
17199, National Bureau of Economic Research, Inc.
- Zeckhauser, Richard Jay & Tran, Ngoc-Khanh, 2011. "The Behavior of Savings and Asset Prices When Preferences and Beliefs are Heterogeneous," Scholarly Articles 5027955, Harvard Kennedy School of Government.
- Tran, Ngoc-Khanh & Zeckhauser, Richard J., 2011. "The Behavior of Savings and Asset Prices When Preferences and Beliefs Are Heterogeneous," Working Paper Series rwp11-026, Harvard University, John F. Kennedy School of Government.
- Adam Eric Greenberg, 2013. "When imagining future wealth influences risky decision making," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 8(3), pages 268-277, May.
- Michael Ewens & Bryan Tomlin & Liang Choon Wang, .
"Statistical Discrimination or Prejudice? A Large Sample Field Experiment,"
GSIA Working Papers
2012-E37, Carnegie Mellon University, Tepper School of Business.
- Michael Ewens & Bryan Tomlin & Liang Choon Wang, 2012. "Statistical Discrimination or Prejudice? A Large Sample Field Experiment," Monash Economics Working Papers 23-12, Monash University, Department of Economics.
- Moritz Kuhn & Sebastian Koehne, 2013.
"Optimal capital taxation for time-nonseparable preferences,"
2013 Meeting Papers
322, Society for Economic Dynamics.
- Koehne, Sebastian & Kuhn, Moritz, 2013. "Optimal capital taxation for time-nonseparable preferences," MPRA Paper 45203, University Library of Munich, Germany.
- Patrick Bolton & Christopher Harris, 2010.
"The Dynamics of Optimal Risk Sharing,"
NBER Working Papers
16094, National Bureau of Economic Research, Inc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.