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Financial Risk Aversion, Economic Crises and Past Risk Perception

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  • Alessandro Bucciol

    ()
    (Department of Economics (University of Verona))

  • Raffaele Miniaci

    ()
    (University of Brescia)

Abstract

We use a panel dataset from the Dutch Household Survey, covering annually the period 1993-2011, to analyze whether individual risk aversion changes over time with the background economic conditions. Considering six different measures of self-assessed risk aversion, which cover different aspects of risk, our preliminary results show that risk aversion is not stable over time. Its dynamics, however, depends on the type of investor. Those who made no investment in the previous year showed higher risk aversion at the end of the 90s; those who invested, in contrast, showed a steadily constant or decreasing pattern. The gap between the risk aversion of investors and noninvestors was the largest between the end of the 90s and the beginning of the 00s, when the stock market experienced exceptionally high volatility.

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Bibliographic Info

Paper provided by University of Verona, Department of Economics in its series Working Papers with number 28/2012.

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Length: 22
Date of creation: Oct 2012
Date of revision:
Handle: RePEc:ver:wpaper:28/2012

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Keywords: household finance; risk aversion; background risk; past risk perception;

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References

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  1. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde & Jurgen Schupp & Gert Wagner, 2005. "Individual risk attitudes: New evidence from a large, representative, experimentally-validated survey," Framed Field Experiments 00140, The Field Experiments Website.
  2. Baetschmann, Gregori & Staub, Kevin E. & Winkelmann, Rainer, 2011. "Consistent Estimation of the Fixed Effects Ordered Logit Model," IZA Discussion Papers 5443, Institute for the Study of Labor (IZA).
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  4. Ulrike Malmendier & Stefan Nagel, 2009. "Depression Babies: Do Macroeconomic Experiences Affect Risk-Taking?," NBER Working Papers 14813, National Bureau of Economic Research, Inc.
  5. Thomas F. Crossley & Hamish Low & Cormac O’Dea, 2011. "Household Consumption Through Recent Recessions," Koç University-TUSIAD Economic Research Forum Working Papers 1132, Koc University-TUSIAD Economic Research Forum.
  6. Alessandro Bucciol & Raffaele Miniaci, 2010. "Househould portfolios and implicit risk preferences," Working Papers 1006, University of Brescia, Department of Economics.
  7. Hans-Martin von Gaudecker & Arthur van Soest & Erik Wengstrom, 2011. "Heterogeneity in Risky Choice Behavior in a Broad Population," American Economic Review, American Economic Association, vol. 101(2), pages 664-94, April.
  8. Laurent E. Calvet & John Y. Campbell & Paolo Sodini, 2008. "Fight or Flight? Portfolio Rebalancing by Individual Investors," NBER Working Papers 14177, National Bureau of Economic Research, Inc.
  9. Donkers, Bas & Melenberg, Bertrand & Van Soest, Arthur, 2001. " Estimating Risk Attitudes Using Lotteries: A Large Sample Approach," Journal of Risk and Uncertainty, Springer, vol. 22(2), pages 165-95, March.
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Cited by:
  1. Alessandro Bucciol & Luca Zarri, 2013. "Financial Risk Aversion and Personal Life History," Working Papers 05/2013, University of Verona, Department of Economics.
  2. Timothy King & Jonathan Williams, 2013. "Bank Efficiency and Executive Compensation," Working Papers 13009, Bangor Business School, Prifysgol Bangor University (Cymru / Wales).

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